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Capital gain dividend

A payment from an investment company (like a mutual fund) to its shareholders that represents the profits the company made from selling off some of its investments at a higher price than it bought them.

Regulated investment company

A type of company, such as a mutual fund or exchange-traded fund (ETF), that pools money from many investors and invests it in a diversified portfolio of securities. They must meet certain requirements to qualify for special tax treatment.

Defer recognition

To postpone the moment when an income or gain is officially counted for tax purposes, meaning you don't have to pay tax on it until a later time or event.

Dividend reinvestment plan

An arrangement where any cash dividends or capital gain distributions you receive from an investment are automatically used to buy more shares of that same investment, rather than being paid out to you directly.

Internal Revenue Code of 1986

The official body of tax law in the United States, which governs how individuals and businesses are taxed.