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Funds 104: Taxes on Mutual Fund Income

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1.
Which would you rather own in a taxable account?
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It depends on which is the better aftertax performer. If you're investing in a taxable account, it's wise to consider taxes when investing. However, don't let the tax tail wag the investment dog. What's most important is how much you keep after taxes, not how much Uncle Sam gets.
2.
Income from municipal bond mutual funds may be taxable on the state level.
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True. In some cases, they are taxable on the state level.
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 IRS form reports withdrawals from retirement plans?
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1099-R. This form reports retirement plan withdrawals.
5.
You may be taxed on a transfer between mutual funds because the IRS sees the transfer as a dividend.
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False. You will be taxed on it because the IRS sees it as a capital gain, if one has been made.