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1.
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.
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.
What is the tax attraction of variable annuities?
Contributions grow tax-deferred until retirement. Gains are then taxed as income upon withdrawal.
4.
When selling stock, you can sometimes reduce your capital gains if you sell only certain shares and not others.
True. If the shares were bought at different prices, you can specify that shares bought at higher prices be sold, which can then lower your capital gains.
5.
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.
