It's possible. say a fund holds stock X and its market value increase from say $10/share to $20/share but the fund does not sell the stock. then there should be no gain for the mutual fund shareholders. if the stock is sold at a gain even if the fund does not distribute the proceeds the shareholders would have income. however, there are situations where there may be special treatment. for example, if a fund sells shares at a loss, that loss can't be passed out to the shareholders but may offset gains on sales. earnings on what the fund holds such as dividends and interest would be taxable to the shareholders even if not distributed. if there is taxable income to the shareholders then the fund would issue 1099s, 1098-Bs or possibly form 2439. specific questions need to be addressed to the fund.
