(2) Mutual fund capital gains reported on Box 2a of Form 1099-DIV are capital gains incurred by the mutual fund itself on its own transactions. These are passed on to shareholders. From a tax perspective, this is one of the disadvantages of a mutual fund. You then have individual capital gains/losses when you sell your shares.
Why? Because that is the way tax law is writtten.
If capital gains and dividend distributions were not made periodically, the NAV would never be reduced by such distributions and you would end up paying the taxes on the overall gain when you sold the shares instead of paying part of it along the way.
Don't see that anyone mentioned it but
If you reinvested the dividends and bought more stock or shares you need to add the dividends to your cost basis so you don't pay tax on them again. A reinvested dividend is really 2 transactions, a dividend and a buy. You got a Dividend and then you bought more shares. Same with any Capital Gain distributions.