A FALSE ALARM ON SURPRISE TAXES AS THE DOW HAS SOARED, stock mutual-fund investors have gotten nervous about ungodly tax bills from unusually large yearend capital-gains distributions. Fear not. The typical fund owner's taxable capital gain should be significantly lower than in 1995. There has been a lot of buzz to suggest fat gains (hence, fat tax bills) are on the way. Many funds have notified investors to watch out for sizable distributions--the proceeds from a fund's trading profits. CGM Mutual Fund, for instance, recently pegged its one at $2.89 per share, more than triple last year's. But the overall picture is less rosy. Based on figures from the Investment Company Institute trade group, BUSINESS WEEK estimates that the net realized capital gains by all equity funds through 1996's first 11 months were $32 billion. In 1995, however, gains totaled a record $54.6 billion. Why the 1996 drop? Mainly, a less spectacular bull market. In '95, stock mutual funds rose nearly 30% on average. For 1996 through last month, funds were up 18%. This year's rally has been concentrated in large-cap stocks. Mutual funds tend to be heavily into smaller-cap issues. EDITED BY LARRY LIGHT By Owen Ullmann and Jeffrey M. Laderman RELATED ITEMS CHART: Mutual Fund Capital Gains Distributions Return to top of story

Updated June 14, 1997 by bwwebmaster
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