Choose wisely. There is only one correct answer to each question.
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1.
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.
2.
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.
3.
Income from cash investments is taxed at _______.
Ordinary income tax rates. For this reason, it might make sense to keep your cash in tax-sheltered accounts; however, cash's value as a way to meet near-term needs means most people will keep it in taxable accounts for easier access and lack of withdrawal penalties.
4.
Tax-wise, bonds are a good fit for tax-sheltered accounts rather than taxable accounts because their payouts are taxed at your ordinary income tax rate.
True. For tax purposes, it probably makes sense to keep bonds in tax-sheltered accounts because of their relatively high tax rates.
5.
Stock investors can exert more control over capital gains than bond investors by simply holding on to their stocks.
True. Given that bonds have to mature at some point, you can hold onto stocks longer than you could with many bonds.
