The distribution of capital gains by mutual funds and ETFs at year end presents the risk of extra taxation. If a distribution happens to you, be sure to keep track of your adjusted cost base (ACB).
As noted in the previous post, a distribution to a taxable account results in a cash disbursement (orin units) and equivalent reduction in the funds unit price. Failure to keep track of your ACB could result inan avoidable tax burden.
First, tax will be paid in the year the distribution is made. Second, tax will not be recovered in the year the investment is sold if the owner fails to adjust the purchase price upward by the amount of the distribution (to show a smaller capital gain).