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.
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.
3.
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.
4.
Contributions to variable annuities grow tax-deferred until you take them out at retirement.
True. That is one of their big attractions.
5.
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.
