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Funds 104: Taxes on Mutual Fund Income

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1.
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.
2.
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.
3.
Which IRS form shows ordinary dividends?
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1099-DIV. Form 1099-DIV reports dividends.
4.
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.
5.
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.