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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 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.
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.
Variable annuities (VAs) are a kind of hybrid between mutual funds and _______.
Insurance. Variable annuities are essentially mutual funds wrapped in an insurance package.
5.
How do tax-managed funds limit shareholders' tax burdens?
They avoid dividend-paying stocks, they hold securities for a long time, and they sell losing stocks to offset gains in winning stocks. Tax-managed funds use a variety of strategies--not just one--to limit taxes.
