For mutual fund taxable capital gain distributions to be long-term, what minimum holding period is required?

Mutual fund capital gain distributions are treated as long-term capital gains regardless of how long an investor has held the shares of the mutual fund. This is because the gains distributed by the mutual fund originate from the sale of securities held by the fund for longer than a year.

When mutual funds sell investments at a profit, they realize capital gains, which they are required to distribute to shareholders at least once a year. The IRS recognizes these distributions as long-term, provided they stem from long-term capital gains, meaning that the underlying investments were held for more than one year. This classification offers favorable tax rates compared to short-term capital gains, which are taxed at ordinary income tax rates.

Thus, there is no minimum holding period required for individual shareholders of the mutual fund in order to receive long-term capital gain treatment on these distributions.