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Funds 104: Taxes on Mutual Fund Income

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1.
The _______ is what you earn when you sell mutual fund shares at a profit.
Choose wisely. There is only one correct answer.
Capital gain. The other two are earned when the fund, not you, makes a profit.
2.
Buying a mutual fund that has a very low turnover rate will reduce the number of _______.
Choose wisely. There is only one correct answer.
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.
3.
Which IRS tax form shows the proceeds of mutual fund share sales?
Choose wisely. There is only one correct answer.
1099-B. This form reports the sales of shares.
4.
You may be taxed on a transfer between mutual funds because the IRS sees the transfer as a dividend.
Choose wisely. There is only one correct answer.
False. You will be taxed on it because the IRS sees it as a capital gain, if one has been made.
5.
Income from municipal bond mutual funds may be taxable on the state level.
Choose wisely. There is only one correct answer.
True. In some cases, they are taxable on the state level.