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Funds 104: Taxes on Mutual Fund Income

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1.
A capital loss is the return of your original investment back to you.
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False. A capital loss is a loss you suffer when you sell shares for less than the price you paid for them.
2.
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.
3.
An exchange of shares from one mutual fund to another in a fund family is a taxable event, except in the case of _______.
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Qualified retirement plans. Exchanges made within qualified retirement plans are tax-exempt.
4.
The _______ is what you earn when you sell mutual fund shares at a profit.
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Capital gain. The other two are earned when the fund, not you, makes a profit.
5.
Which IRS tax form shows the proceeds of mutual fund share sales?
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1099-B. This form reports the sales of shares.