When I see a question about capital gains in an open-end fund, I’m not...

There are two ways capital gains come into play for mutual funds. If the investment adviser realizes more gains than losses by trading portfolio securities, the fund realizes a net capital gain for the year. They can either distribute this to the shareholders or not. Either way, investors are taxed on their proportional share of this capital gains distribution. No matter how recently they bought into the fund, all investors are taxed at their long-term capital gains rate. The holding period is based on the mutual fund’s holding period, not the shareholders of the fund. The other way capital gains come into play is when the shareholder sells/redeems shares. If the holding period is at least 12 months plus 1 day, the gains/losses are long-term. If not, they are short-term.