Why does a mutual fund pay capital gain distributions?
Capital gains are distributed to shareholders only after a fund has used up its current losses and any carry-forward losses from prior years. A mutual fund is required to distribute net capital gains to shareholders, generally based on an Oct. 31 date, by the end of the calendar year. These year-end distributions can also include net capital gains earned during the prior fiscal year. Capital gain distributions typically occur once a year. If a mutual fund has net capital losses at the end of its taxable year, those losses carry forward to offset gains in future years.
