Why do I pay capital gains when the money was not taken out of the account?

[ELF15]

My Turbo tax is saying I need to pay capital gains on my dividends but they were rolled over and not taken out of my account.  Is this correct?

[MaryK4]

Yes, if it was a mutual fund you must report capital gains distributed even if you did not receive any money out of the account.  

A mutual fund is a regulated investment company that pools funds of investors allowing them to take advantage of a diversity of investments and professional asset management.

You own shares in the mutual fund but the fund owns capital assets, such as shares of stock, corporate bonds, government obligations, etc. One of the ways the fund makes money for you is to sell these assets at a gain.

If the mutual fund held the capital asset for more than one year, the nature of the income is capital gain, and the mutual fund passes it on to you as a capital gain distribution. These capital gain distributions are usually paid to you or credited to your mutual fund account, and are considered income to you. 

 From I received a 1099-DIV showing a capital gain.