DEFINITION of 'Reclassification'

The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event.

BREAKING DOWN 'Reclassification'

Sometimes mutual fund companies will decide to issue more than one series of similar mutual funds. Each series has different features and durations, and when the restrictions expire, they become reclassified to the fund with no restrictions.

Suppose that a company issues two mutual funds. Fund A is a no load fund, while Fund B is a five-year, back-end load fund. After five years, when there is no longer a load structure, Fund B will then be reclassified to fund A.

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