Are You Ready for Some Tax Hits? Fall's the Season for Fund Distributions

Ah, fall. That special time of year when one's thoughts turn to long walks along leaf-covered paths, endless hours of NFL coverage, gathering the family for Thanksgiving and, of course, capital-gains distributions.

OK, maybe capital-gains distributions aren't at the forefront of your mind right now, but they should be. Most mutual fund companies distribute their capital gains to shareholders in December, so many of them will begin releasing their preliminary distribution estimates this month. While these estimates are by no means final, investors should check them out to prepare themselves for what kind of tax hit they might be in for come filing time.

Capital-gains distributions occur when a mutual fund sells a holding in a stock, creating a taxable gain (or a loss) that is then passed on to the fund's shareholders. ...