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1.
Contributions to variable annuities grow tax-deferred until you take them out at retirement.
True. That is one of their big attractions.
2.
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.
3.
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.
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.
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.
