Smart401k Blog

  • What are capital gains distributions?

    So, what are capital gains distributions? Mutual funds buy and sell securities, or investments, throughout the year. When a fund sells a security for more than the purchase price, the fund receives a capital gain. If the fund has owned the security for less than a year, the gain is short-term. If the fund has owned the security for over a year, the gain is classified as long-term. The significance of the holding period affects taxation. Short-term gains are taxed at the same rate as ordinary income. Long-term gains are taxed at a special rate of 15% or 5% for those in the lowest income tax bracket.
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