Capital Gains Distribution

AAA

DEFINITION of 'Capital Gains Distribution'

The payment of proceeds prompted by a fund manager's liquidation of underlying stocks and securities in a mutual fund. Capital gains distribution occurs when a mutual fund manager liquidates underlying positions that have made gains since they were added to the fund. Capital gains distributions will be taxed as capital gains to the person receiving the distribution.

INVESTOPEDIA EXPLAINS 'Capital Gains Distribution'

Holders of mutual fund shares will be required to pay capital gains tax on any capital gains distributions made by the funds they own. Before 1986, all mutual fund shareholders were charged long-term capital gains on distributions, regardless of how long they'd held the funds. With the passing of the 1986 Tax Reform Act, shareholders now pay long- or short-term capital gains tax based on the time they've owned the fund.

RELATED TERMS
  1. Shareholder

    Any person, company or other institution that owns at least one ...
  2. Capital Loss

    The loss incurred when a capital asset (investment or real estate) ...
  3. Net Asset Value - NAV

    A mutual fund's price per share or exchange-traded fund's (ETF) ...
  4. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  5. Distribution

    1. When trading volume is higher than that of the previous day ...
  6. Tax Gain/Loss Harvesting

    Selling securities at a loss to offset a capital gains tax liability. ...
Related Articles
  1. Will A New Fund Manager Cost You?
    Mutual Funds & ETFs

    Will A New Fund Manager Cost You?

  2. What You Need To Know About Capital ...
    Taxes

    What You Need To Know About Capital ...

  3. Capital Gains Tax 101
    Taxes

    Capital Gains Tax 101

  4. I am a non-U.S. citizen living outside ...
    Investing

    I am a non-U.S. citizen living outside ...

comments powered by Disqus
Hot Definitions
  1. 80-10-10 Mortgage

    A mortgage transaction in which a first and second mortgage are simultaneously originated. The first position lien has an ...
  2. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific ...
  3. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  4. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  5. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center