What is a mutual fund capital gain distribution?
A realized capital gain occurs for a mutual fund when the difference between the price paid for a security, its basis, and the price for which it is sold results in a profit. Mutual funds net realized capital gains against realized capital losses. Net realized gains, if any, are distributed to shareholders. Generally, a mutual fund incurs two types of capital gains: short-term and long-term. A fund first offsets its capital gains against its capital losses which can result in net short-term capital gains and/or net long-term capital gains, or net capital losses. Short-term capital gains are any gains realized from the sale of securities within a fund that the fund has held for one year or less. Net realized short-term gains are included with the ordinary dividend and taxed at ordinary income tax rates. Net realized long-term capital gains are net gains from the sale of securities held by a fund for more than one year. Long-term gains are currently taxed at a rate of 15% (0% for those i
