Choose wisely. There is only one correct answer to each question.
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1.
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.
2.
Your basis in an investment is how much you paid for it.
False. You may need to include reinvested dividends that have already been taxed.
3.
What is your basis composed of?
Both of the above. Your basis is the combination of cash paid plus any dividends reinvested that have already been taxed.
4.
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.
5.
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.
