Choose wisely. There is only one correct answer to each question.
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1.
When might you consider waiting to sell an investment?
If you've held the security for less than one year. You must pay ordinary-income taxes--which range from 10% to 35%--on investments you've held for less than a year.
2.
In which situation might you consider waiting to sell an investment?
A big capital gains tax would hit you hard right now. Consider waiting until you can make up that hit with other tax savings.
3.
Your basis in an investment is a combination of cash paid plus any dividends reinvested that have already been taxed.
True. In a nutshell, basis is all the money you've put into an investment. When you sell the investment, you subtract this basis from the proceeds to arrive at your capital gain.
4.
If an investor has held a security for less than one year, at what rate will his or her capital gains be taxed?
It depends on the investor's ordinary income tax rate. If an investor has held the security for at least one year, he's eligible for the long-term capital gains tax rate. Short-term gains--gains made on securities held for less than one year--are taxed at his ordinary income tax rate.
5.
What is the purpose of tax-loss selling?
To minimize the amount of tax that you pay on an investment that you have sold for a profit. Tax-loss selling is a tax-management strategy.
