Choose wisely. There is only one correct answer to each question.
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1.
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.
2.
What is the tax attraction of variable annuities?
Contributions grow tax-deferred until retirement. Gains are then taxed as income upon withdrawal.
3.
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.
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.
Imagine you're a tax-sensitive investor. Which is the better bond for you?
It depends on your tax bracket. Investors in high tax brackets may benefit more from a muni--even if it has a lower yield--due to the tax break.
