Capital gains distribution

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Capital gains distribution

A distribution to the shareholders of a mutual fund out of profits from selling stocks or bonds, that is subject to capital gains taxes for the shareholders.

Capital Gains Distribution

An amount of money paid to shareholders of a mutual fund from its capital gains over the course of a year. That is, a mutual fund takes its capital gains over a year and divides them among shareholders, who are then responsible for capital gains taxes. Capital gains distributions are usually made at the end of each calendar year and they reduce the fund's net asset value. Because of the existence of capital gains distributions, some analysts advise against purchasing mutual funds at the end of a calendar year because a shareholder will become instantly liable for capital gains taxes.

capital gains distribution

Payments to investment company shareholders based on gains from securities in the firm's portfolio that have been sold. These gains are passed through to the shareholders and are taxed to the shareholders. Distributions usually occur once each year.
Case Study Capital gains distributions can produce unexpected tax problems for mutual fund shareholders, especially investors who acquire mutual fund shares following a major increase in stock values. An even greater surprise occurs when a large distribution occurs during a year of poor market performance. Mutual funds are required to distribute to their shareholders all of the net gains the funds realize through the sale of securities. Unfortunately for some investors, gains that occur during one period are realized and distributed in a subsequent period. Buy a mutual fund following a major increase in stock values and you are likely to receive distributions on gains from which you did not benefit. In 2000 Warburg Pincus Asset Management made a capital gains distribution equal to a stunning 55% of assets to the shareholders of its Warburg Pincus Japan Small Company Fund. The distribution was occasioned by a year of spectacular gains in 1999 (a return of 329%) followed by a year of poor performance with resulting shareholder redemptions that forced portfolio managers to sell stocks to raise cash. Stock sales by the fund produced capital gains that triggered the distribution by Warburg Pincus. Although mutual funds typically make distributions during the end of the calendar year, Warburg Pincus officials indicated their distribution was made early in the year to allow shareholders time to take care of any tax liability. In a similar event, in December 2000 Select Software and Computer Services Fund distributed nearly 40% of its net asset value even though the fund was down over 9% for the year. Investors who purchased shares in the fund in early 2000 received a large taxable distribution even though their shares had lost market value during the year. Woe to the investor who fails to research a mutual fund purchase.

Capital gains distribution.

When mutual fund companies sell investments that have increased in value, the profits, or capital gains, are passed on to their shareholders as capital gains distributions.

These distributions are made on a regular schedule, often at the end of the year and are taxable at your regular rate unless the funds are held in a tax-deferred or tax-free account.

Most funds offer the option of automatically reinvesting all or part of your capital gains distributions to buy more shares.

References in periodicals archive ?
(NYSE: TWN) has announced the confirmation of a long term capital gain distribution in the amount of USD 1.7078 per share, the company said.
This may result in a reduction of the long-term capital gain distribution necessary at year end by distributing long-term capital gains throughout the year.
The company will distribute USD2.60 per share, consisting of a capital gain distribution of USD2.52 per share; and an income dividend of USD0.08 per share.
14 The Fund's capital gain earnings has been identified on Form 1099-DIV as simply Capital Gain Distribution. On the actual statement it shows up as a Long Term Capital Gain (LT Cap Gain).
(NYSE:KF) has said that its board of directors has declared a net investment income dividend of USD0.60784 per share and a long-term capital gain distribution of USD4.61824 per share.
The Korea Fund Inc (NYSE:KF) declared on Saturday that its board of directors approved a net investment income dividend of USD0.60784 per share and a long-term capital gain distribution of USD4.61824 per share.
(NYSE symbol -- GAM), a closed-end investment company, declared a spill-over capital gain distribution on its common stock totaling USD 0.50 per share from net long-term profits on securities sold during the period November 1, 2017 through December 31, 2017, the company said.
M2 EQUITYBITES-December 5, 2018-Eaton Vance National Municipal Opportunities Trust announces capital gain distribution of USD0.1074 per share
Global Banking News-December 5, 2018-Eaton Vance National Municipal Opportunities Trust announces capital gain distribution of USD0.1074 per share
In addition, the Corporation declared a capital gain distribution of USD 0.0950 per share of Common Stock.
Also, PDT will pay a capital gain distribution of USD0.0342 per share and HTD will pay USD0.4051 per share.
(NYSE:KF) has declared a net investment income distribution of USD0.56343 per share and a long-term capital gain distribution of USD0.05097 per share, the company said.