The Globe and Mail reports in its Saturday edition that "phantom" distributions, such as one done recently at Canadian Apartment Properties REIT, are so named because no cash changes hands and the number of units does not change. The Globe's John Heinzl writes that many investors are understandably puzzled by these distributions, but it is important to understand how they work so you do not end up paying more tax than necessary down the road. Phantom distributions typically consist of capital gains that a REIT -- or, more commonly, an exchange-traded fund -- realized during the year and reinvested internally. The purpose of the year-end distribution is simply to push the capital gains tax liability into the hands of the unitholder. That is all. In CAP REIT's case, the non-cash distribution of 49 cents per unit represented a portion of the capital gains it triggered in 2023 by selling certain older, non-core properties. Those capital gains, combined with CAP REIT's increased operating income, created a situation in which the REIT's taxable income for the year exceeded the total value of its regular monthly distributions. So the REIT "distributed" the excess to unitholders, but only on paper, for tax purposes.