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Funds 104: Taxes on Mutual Fund Income

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1.
Income from municipal bond mutual funds may be taxable on the state level.
Choose wisely. There is only one correct answer.
True. In some cases, they are taxable on the state level.
2.
Capital gains distributions are taxed at your ordinary income tax rate.
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False. They are taxed at either the short-term or the long-term rate, whichever is applicable.
3.
Which IRS tax form shows the proceeds of mutual fund share sales?
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1099-B. This form reports the sales of shares.
4.
Buying a mutual fund that has a very low turnover rate will reduce the number of _______.
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Capital gains. A lot of turnover will likely result in a lot of capital gains, which are normally taxable. If you want to reduce taxes, consider low-turnover funds.
5.
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.