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2. The payment of the assets in an IRA or other retirement account to the account holder or his/her beneficiary. Distributions usually begin after retirement, but may begin before with the payment of applicable penalties.
3. A dividend paid to a company's or mutual fund's shareholders.
4. An institution's consistent sale of a single security over a long period of time as opposed to all at once. This is done to avoid causing fluctuations in price. See also: Accumulation.
A distribution is money a mutual fund pays its shareholders either from the dividends or interest it earns or from the capital gains it realizes on the sale of securities in its portfolio.
Unless you own the fund through a tax-deferred or tax-free account, you owe federal income tax on most distributions, the exception being interest income from municipal bond funds. That tax is due whether or not you reinvest the money to buy additional shares in the fund.
You'll owe tax at your regular rate on short-term gains and on income from interest. The tax on qualifying dividends and long-term gains is calculated at your long-term capital gains rate. Your end-of-year statement will indicate which income belongs to each category.
The term distribution is also used to describe certain actions a corporation takes. For example, if a corporation spins off a subsidiary as a standalone company, it will issue shares in that subsidiary to current stockholders. That's considered a distribution. Corporate dividends may also be described as distributions.