I invested in a mutual fund on Dec 12 and now found out I have substantial taxable gains in that fund even though at the end of the year the fund was worth about what I paid for it. How could that be?

You probably bought the fund before its capital gain distribution. When you buy a fund before its capital gain distribution, you can end up owing money on your own money. Always buy after the distribution. Please contact a CPA in your community to avoid making these costly mistakes again.