Funds Beginner: Taxes on Mutual Fund Income

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1.
Which IRS form shows ordinary dividends?
Choose wisely. There is only one correct answer.
1099-DIV. Form 1099-DIV reports dividends.
2.
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.
3.
When you exchange mutual fund shares from one fund to another in a fund family, it is a tax-free exchange.
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False. An exchange is considered a sale and purchase for tax purposes, except in qualified retirement plans.
4.
Which would you rather own in a taxable account?
Choose wisely. There is only one correct answer.
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.
A capital loss is the return of your original investment back to you.
Choose wisely. There is only one correct answer.
False. A capital loss is a loss you suffer when you sell shares for less than the price you paid for them.