Mutually Surprising Tax Hits

It's capital gains season again for those of you who hold -- or are planning to buy -- mutual funds in taxable accounts.

And depending on what fund you're talking about, this year may hold more tax surprises than most recent years. Why? I'll get to that in a minute.

First, let me refresh you on how capital gains distributions work. Most funds, especially the actively managed variety, buy and sell stock and other securities throughout the year. As the security portfolio gains value through the year, so does the so-called "Net Asset Value," or NAV, of the fund. So your shares increase in value through the year. ...