Choose wisely. There is only one correct answer to each question.
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1.
Investing from a tax perspective often contradicts its practicalities. One example of why is that _______.
Investors often hold long-term stocks in tax-sheltered accounts even though those stocks are taxed at low capital gains rates. From a tax perspective, it doesn't make sense to do this. But practical reasons override that.
2.
Which investments do an effective job of restraining capital gains distributions?
All of the above. All of these investments are structured in such a way as to keep the lid on capital gains distributions.
3.
Cash investments are taxed at ordinary income rates, meaning it's wise to put them in tax-sheltered accounts to cut down on your tax burden. But you might want to contradict that advice because _______.
Both of the above. Sometimes practical needs just outweigh tax needs.
4.
Why would exchange-traded funds be good choices to be held in taxable accounts?
They limit capital gains payouts. This is a feature that is built in to them.
5.
In general, which investments below are not good choices for tax-sheltered accounts?
Non-dividend paying stocks. Long-term capital gains, which is what you have when you sell a stock that you've held for at least a year, are taxed at a much lower rate than is bond income or dividends.
