A capital gain on which one owes taxes even if one takes a capital loss in the aggregate. The most common type of phantom gain occurs when a mutual fundsells some of its securities at a gain but its own shares decline in value. Because the fund's shareholders technically owned the securities that were sold for a gain, they must pay taxes on those gains even though they have actually lost money on their investment. A phantom gain should not be confused with a paper gain. See also: Phantom Income.
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