Capital Gains Distribution
A mandatory payment to fund shareholders when a mutual fund or ETF realizes net capital gains during a tax year. Required by IRS Subchapter M rules: a regulated investment company must distribute essentially all of its net capital gains to retain favorable tax treatment. For mutual fund investors in taxable accounts, these distributions are taxed in the year received (regardless of whether the shareholder sold), creating the annual tax drag that ETFs structurally avoid through in-kind redemption.
Lessons that use this term
Related terms
Adjusted Cost Basis · Annuity · Capitalized Interest · Cost Basis · Dividend Discount Model (DDM) · Dollar-Cost Averaging
Open this term in the app → — no account needed; browse the full glossary while you research.