Choose wisely. There is only one correct answer to each question.
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1.
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.
2.
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.
3.
Variable annuities (VAs) are a kind of hybrid between mutual funds and _______.
Insurance. Variable annuities are essentially mutual funds wrapped in an insurance package.
4.
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.
5.
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.
