Choose wisely. There is only one correct answer to each question.
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1.
When selling stock, you can sometimes reduce your capital gains if you sell only certain shares and not others.
True. If the shares were bought at different prices, you can specify that shares bought at higher prices be sold, which can then lower your capital gains.
2.
Municipal bonds are popular with investors because they are free of ______ tax.
Federal and sometimes state. Muni bonds are free of federal and sometimes state taxes. This can sometimes make them more attractive than bonds that pay higher interest rates. It depends on your tax bracket.
3.
Exchange-traded funds _______ pass capital gains taxes to their shareholders.
Do not. ETFs only generate taxes by owning dividend-paying stocks or by changing their holdings to reflect changes in their indexes.
4.
A tax-managed fund can't be considered tax-managed if it contains large companies, since large companies are more likely to pay dividends than smaller ones.
False. There are plenty of large companies that qualify to be in tax-managed funds. They simply don't need to be paying dividends.
5.
Contributions to variable annuities grow tax-deferred until you take them out at retirement.
