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Mutual fund investors are sometimes blindsided at tax time when they discover they must pay capital gains taxes on a fund that they didn't sell. For those who think that not selling

your mutual fund shares means you don't owe taxes on capital gains, think again. In the last couple of weeks, two people who recently filed their tax returns came to me baffled about

owing thousands of dollars in capital gains taxes that they didn't expect. Let's look at one of these situations, and then at what you can do so this doesn't happen to you. A

woman who recently met with me brought along her brokerage statement and tax return. One fund alone generated a capital gain of over $63,000, or nearly 30 percent of the total she had

invested in that fund at the end of 2015. This not only generated a large capital gains tax, but she ended up owing significantly more because of the ugly alternative minimum tax. "This

happens to me every year, though this is by far the worse," she told me. And she hadn't sold any of the fund shares. "It just happens," she said. This particular mutual

fund is the Columbia Acorn Select Z. You might think she shouldn't complain with such gains, but the fund actually declined slightly in 2015, falling by 0.44 percent, according to

Chicago-based investment research company Morningstar. Yet it gave its shareholders a $7.14 per share capital gain. Why? Because when a mutual fund sells shares of stocks it owns, it passes

those gains through to its shareholders — regardless of whether the shareholders sold shares of the fund. This fund sold about 55 percent of its holdings last year. A spokesperson for the

fund family explained that the turnover was due to two things. First, there was a change in the fund manager, who repositioned its holdings. Second, the fund incurred net redemptions, which

is more people selling the fund than buying into it. When mutual fund shareholders cash out, the fund must sell shares of the stocks it holds to raise the needed cash. Morningstar notes that

this fund, once a stellar performer, has underperformed over the past several years and has lost over $900 million of the $1.3 billion in assets it managed as of the end of 2011.