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Finance: What is Capital Gains Distribution? 21 Views
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Description:
What is Capital Gains Distribution? Owners of equity based mutual funds which are successful in investing will inevitably be the recipients of their prorated portion of trading profits in the form of capital gains distributions. These gains are subject to capital gains taxes, and may be in the form of cash or additional shares.
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Transcript
- 00:00
Finance a la shmoop what are capital gains distributions? cap gains app
- 00:08
hap-happy day.. your mutual fund invested a hundred grand in whatever.com it then [Mutual fund appears]
- 00:14
was bought by Google for three hundred grand
- 00:17
three years after you invested at least that was your portion that three hundred
- 00:21
grand well you had a gain of two hundred grand
Full Transcript
- 00:23
on your investment and because Google paid cash not stock in acquiring
- 00:27
whatever.com on your books the gain was realized ie turned into cash so then the
- 00:34
mutual fund has to distribute to you that capital gains ie the cash it [Capital gains definition appears]
- 00:39
realized in selling the company to the kindly loving people at Google whose
- 00:45
motto is do only a little bit of evil right so one more time for the people in
- 00:49
the back how does this capital gains distribution thing work well the fund
- 00:53
manager looking out for your mutual fund may sell or buy some of the stocks or [Fund manager appears with stocks and bonds]
- 00:58
bonds in your fund if she sells and makes a profit well then that profit or
- 01:03
the proportionate gains part of it has to be distributed to the fund holder and
- 01:08
that's you and then of course you got to pay taxes
- 01:11
on that distribution if your fund is held in a normal account like it's in a
- 01:15
401k or an IRA you'll pay taxes on it later but not right away and if you own
- 01:19
it personally well you'll pay at that year yeah Uncle Sam always needs to get [Uncle Sam appears]
- 01:23
his cut when there's capital gains distribution if he doesn't he gets angry
- 01:27
and you know you wouldn't like Uncle Sam when he's angry [Uncle Sam turns into Hulk]
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