A year-end distribution is the capital gain disbursed at the end of a company’s fiscal year. The number of shares or dividends in the company divides the capital gain. The year-end distribution is equally applied to each share or dividend in the company. Mutual fund companies are also required to pay out year-end distributions to investors who pay taxes on their mutual fund accounts. If there is any gain within the company, the law requires that the company pay that back to the fund holders.

Some companies give stockholders or fund holders the option of reinvesting the year-end distribution in more stock or mutual fund shares. Other companies allow investors the opportunity to receive the cash value of the distribution. The distribution is taxable, whether it is reinvested or received in cash. The type of stock or mutual fund has a corresponding tax table used to determine how much the investor will be taxed on the distribution. Taxes may be as high as 25 percent of the investor’s total year-end distribution return.

The interesting thing about year-end distributions is that in most companies they are payable to anyone who owns the stock or mutual fund on the last day of the business’ fiscal year. It does not matter how long the investor owned the stock or fund for the course of the year. People who were invested for 365 days receive the same year-end distribution as those who were on the books for 5 days.

In hard economic times, it is possible for a company that regularly experienced capital gains to see a capital loss. With the loss, there is not a year-end distribution; nor is there a year-end collection in which investors must pay the company for the loss per share. Instead, the investors lose money in the funds, stocks, or dividends when they sell. For more information about year-end distribution see the CNN Money Web site at CNNMoney.com.