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. Distribution

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

    Selling securities at a loss to offset a capital gains tax liability. ...
  6. Capital Gains Exposure - CGE

    An assessment of the extent to which a stock fund or other similar ...
Related Articles
  1. Mutual Funds & ETFs

    Will A New Fund Manager Cost You?

    Learn how a change in leadership could mean more taxes for you.
  2. Taxes

    What You Need To Know About Capital Gains And Taxes

    Find out how your profits are taxed and what to consider when making investment decisions.
  3. Taxes

    Capital Gains Tax 101

    Find out how taxes are applied to your investment returns and how you can reduce your tax burden.
  4. Investing

    I am a non-U.S. citizen living outside the U.S. and trading stocks through a U.S. internet broker. Do ...

    The tax implications for a foreign investor will depend on whether that person is classified as a resident alien or a non-resident alien. To be considered a non-resident alien, a person must ...
  5. Active Trading

    Seek Out Past Losses To Uncover Future Gains

    Tax loss carry-forwards can help reduce the tax burden of owning a profitable fund.
  6. Mutual Funds & ETFs

    Mutual Fund Basics Tutorial

    Learn about the basics - and the pitfalls - of investing in mutual funds.
  7. Investing Basics

    What is the difference between a REIT and a real estate fund?

    A real estate fund invests in securities offered by public real estate properties directly or indirectly through Real Estate Investment Trusts (REITs).
  8. Taxes

    What is the difference between gross income and earned income?

    Being able to distinguish between earned income and gross income is an important tool in preparing for and filing your individual tax returns each year.
  9. Mutual Funds & ETFs

    Can you invest in hedge funds?

    Read about what it takes to invest in a hedge fund, and learn how some investors find ways to indirectly capture a hedge fund's returns.
  10. Economics

    Gary Gordon Positions Your Portfolio For 2015

    Seeking Alpha, the popular financial web portal, interviews Gary Gordon for its Positioning for 2015 series. Here is a transcript of that exchange.

You May Also Like

Hot Definitions
  1. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  2. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  3. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  4. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  5. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  6. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
Trading Center