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Funds 104: Taxes on Mutual Fund Income

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1.
Which IRS form reports withdrawals from retirement plans?
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1099-R. This form reports retirement plan withdrawals.
2.
When you exchange mutual fund shares from one fund to another in a fund family, it is a tax-free exchange.
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False. An exchange is considered a sale and purchase for tax purposes, except in qualified retirement plans.
3.
Capital gains distributions are taxed at your ordinary income tax rate.
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False. They are taxed at either the short-term or the long-term rate, whichever is applicable.
4.
Which of the following are not taxed?
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Capital losses. They are not income.
5.
Buying a mutual fund that has a very low turnover rate will reduce the number of _______.
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Capital gains. A lot of turnover will likely result in a lot of capital gains, which are normally taxable. If you want to reduce taxes, consider low-turnover funds.