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What is a Distribution?

Each year, a mutual fund is required to pass through essentially all income earned (dividends) and capital gains to shareholders, after the expenses of running the fund are paid. Capital gains distributions are normally paid at the end of a calendar year, whereas income distributions are normally paid on a monthly or quarterly basis.

Distributions of dividends and capital gains are taxed at different rates depending on your tax bracket, and whether the account is taxable or non-taxable. Occasionally, mutual funds may not have any capital gains or income distributions.
Distribution information is provided to you by the mutual fund company on IRS Form 1099.

Jemma Everyday Wisdom: When buying a mutual fund in a taxable account, consider the time of year that you are making your purchase. You may not want to buy shares immediately before a mutual fund declares its distribution as it may have tax implications.


This material has been prepared for informational purposes only. Jemma Financial Services does not provide tax advice. Before taking any action, you should consult a tax professional.

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