Capital Gains Distributions from mutual funds. Seems like getting taxed for the

[rhett o rick]

2. Thanks for responding. I did a bad job of presenting my question.

I own shares in a mutual fund that has been increasing in value at a modest rate. Come tax time, I've been shocked the last two years at the huge "capital gains distributions" (CGD) from the fund that I must pay tax on. How can the "capital gains distribution" be higher that the increased value of the fund?

If a fund holds a stock and the stock price rises the fund should rise the same amount, of course everything else being equal. Let's see if I can give an example. Let's say the fund owns a stock that goes up $10 in value. The fund would also go up the same $10. If I sold my fund I would pay tax on that increase. If I didn't sell and the fund sold, their value wouldn't change (still showing a $10 increase in value) and I would be taxed on the $10 profit via CGD. Then if I sold the fund I would again pay for the $10 increase in the funds worth.

I know I must be doing something wrong but getting stuck with large CGD while my fund value is going up modestly is crap.