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Funds 104: Taxes on Mutual Fund Income

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1.
When you exchange mutual fund shares from one fund to another in a fund family, it is a tax-free exchange.
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False. An exchange is considered a sale and purchase for tax purposes, except in qualified retirement plans.
2.
When is the worst time to buy a fund, from a tax standpoint?
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Right before a fund makes a distribution. If you buy a fund just before it makes a distribution, you'll pay taxes on that distribution, even though you haven't enjoyed any of the appreciation that led to that distribution.
3.
A capital loss is the return of your original investment back to you.
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False. A capital loss is a loss you suffer when you sell shares for less than the price you paid for them.
4.
Which of the following in a mutual fund is not taxable?
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A mutual fund share. Only income is taxable.
5.
Which IRS form shows ordinary dividends?
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1099-DIV. Form 1099-DIV reports dividends.