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1.
Municipal bonds offer tax breaks; however, they often pay lower interest rates than taxable bonds. In these cases, what factor would decide whether an investor would choose a municipal bond over a taxable bond?
Her tax bracket. The higher her tax bracket, the more likely the municipal bond would actually work in her favor.
2.
Which statement is true?
Funds with exceptionally low turnover rates tend to be tax efficient. High-turnover funds aren't necessarily less tax efficient than low-turnover funds. A fund with a 200% turnover rate can be just as efficient as a fund with a 50% turnover rate. But funds with 0% to 20% turnover rates tend to be tax-efficient.
3.
What is the tax attraction of variable annuities?
Contributions grow tax-deferred until retirement. Gains are then taxed as income upon withdrawal.
4.
What are exchange-traded funds?
Index funds that trade on an exchange. ETFs are generally index funds that trade like stocks on an exchange.
5.
Which is a benefit of capital losses?
They can cancel out capital gains, and to the extent that losses exceed gains, you can deduct a net loss of up to $3,000 from your taxable income.
