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Capital Gains Distribution Distributions that are paid to an investment company's shareholders out of the capital gains of the company's investment portfolio. Capital gains distributions typically occur near the end of the calendar year and are taxable to the shareholder of the investment company. This poses a problem for some mutual fund investors who purchase new mutual funds near the end of a calendar year. Because they receive a capital gains distribution, they immediately receive taxable income and face a mutual fund NAV that is reduced from the distribution.
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