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Finance a la shmoop what are capital gains distributions? cap gains app

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hap-happy day.. your mutual fund invested a hundred grand in whatever.com it then [Mutual fund appears]

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was bought by Google for three hundred grand

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three years after you invested at least that was your portion that three hundred

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grand well you had a gain of two hundred grand

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on your investment and because Google paid cash not stock in acquiring

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whatever.com on your books the gain was realized ie turned into cash so then the

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mutual fund has to distribute to you that capital gains ie the cash it [Capital gains definition appears]

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realized in selling the company to the kindly loving people at Google whose

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motto is do only a little bit of evil right so one more time for the people in

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the back how does this capital gains distribution thing work well the fund

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manager looking out for your mutual fund may sell or buy some of the stocks or [Fund manager appears with stocks and bonds]

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bonds in your fund if she sells and makes a profit well then that profit or

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the proportionate gains part of it has to be distributed to the fund holder and

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that's you and then of course you got to pay taxes

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on that distribution if your fund is held in a normal account like it's in a

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401k or an IRA you'll pay taxes on it later but not right away and if you own

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it personally well you'll pay at that year yeah Uncle Sam always needs to get [Uncle Sam appears]

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his cut when there's capital gains distribution if he doesn't he gets angry

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and you know you wouldn't like Uncle Sam when he's angry [Uncle Sam turns into Hulk]

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