What are the tax implications and potential impact on the funds’ net asset value sustainability given the upcoming distribution schedule?

Tax implications – Both the Eaton Vance California Municipal Income Trust (CEV) and the Eaton Vance Municipal Income Trust (EVN) pay qualified municipal‑bond interest, which is exempt from federal income tax and, for CEV, generally exempt from California state tax as well. The announced per‑share distributions of $0.0500 (CEV) and $0.0513 (EVN) will therefore be received tax‑free for most investors who hold the shares in a taxable brokerage account, preserving after‑tax yield. However, investors in tax‑advantaged accounts (IRA, 401(k)) do not benefit from the tax‑exempt feature and should treat the distributions as ordinary income for account‑type reporting purposes. Non‑resident alien shareholders may be subject to a 30 % withholding tax unless a tax treaty applies, so they should verify treaty eligibility.

Impact on NAV sustainability – The distribution rates (≈6.3 % for CEV and ≈5.9 % for EVN) are derived from the funds’ current earnings and cash flow, primarily the interest generated by the underlying municipal bonds. Because the payouts are ex‑date‑driven (9/12/2025) and payable (9/24/2025), the NAV will typically dip by roughly the distribution amount on the ex‑date, then recover as the market re‑prices the fund’s remaining assets. The key question is whether the underlying portfolio can maintain these yields given rising interest‑rate risk in the municipal market. If rates continue to climb, bond prices will fall, compressing the fund’s net asset value and possibly forcing a cut in future distributions. Traders should monitor the duration profile of the holdings and the credit quality of the issuers; a high‑duration, high‑credit fund is more likely to sustain current payouts, whereas a shorter‑duration fund may see distribution pressure. Actionable take‑away: for investors seeking tax‑free income, the current distribution levels are attractive, but position sizing should reflect the risk that a sustained rate‑rise environment could erode NAV and trigger a distribution reduction. Consider buy‑the‑dip strategies if the NAV slips disproportionately to the distribution amount, but protect upside with stop‑loss orders near the ex‑date price decline.