Funds Beginner: Taxes on Mutual Fund Income

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1.
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.
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.
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.
4.
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.
5.
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.