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Funds 104: Taxes on Mutual Fund Income

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1.
Capital gains distributions are taxed at your ordinary income tax rate.
Choose wisely. There is only one correct answer.
False. They are taxed at either the short-term or the long-term rate, whichever is applicable.
2.
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.
3.
Which IRS form reports withdrawals from retirement plans?
Choose wisely. There is only one correct answer.
1099-R. This form reports retirement plan withdrawals.
4.
An exchange of shares from one mutual fund to another in a fund family is a taxable event, except in the case of _______.
Choose wisely. There is only one correct answer.
Qualified retirement plans. Exchanges made within qualified retirement plans are tax-exempt.
5.
Buying a mutual fund that has a very low turnover rate will reduce the number of _______.
Choose wisely. There is only one correct answer.
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.