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Tax Form (Kurhan)
Tax Form (Kurhan)

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Why am I paying capital gains if my mutual fund lost money? Add to ...

Hi Nancy,

I’ve just received a tax document from the bank showing over $8,000 in capital gains this year on a mutual fund I own. How can this be when the fund is worth less now than it was a year ago? I haven’t bought or sold any units during the year.

Terry

Dear Terry,

The capital gains can happen to any mutual fund because the fund manager sells holdings within the fund during the year to realize gains. It is at their full discretion to do so. These capital gains are different than the capital gain/loss that you as a fund owner can realize when you sell your own units.

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This is a possibility that unit holders must be aware of, especially when purchasing funds in the latter part of the year. They can be taxed capital gains that were realized even prior to them being a unit holder.

Nancy



Nancy Woods, CIM, FCSI, is an associate portfolio manager and investment adviser with RBC Dominion Securities Inc. To ask her a question, send an e-mail to asknancy@rbc.com or visit her web site at nancywoods.com

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