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1.
A reasonably intelligent person who studies the tax code from time to time can probably make good decisions about how to shelter investment income from taxes.
Choose wisely. There is only one correct answer.
False. Even the simplest workplace retirement plan can have tax implications that require expert advice.
2.
The profits realized on the sale of appreciated stocks you held for more than a year are subject to lowered tax rates.
Choose wisely. There is only one correct answer.
True. Profits made on the sale of stocks you held for more than a year are long-term capital gains, which are taxed at lower rates than regular income, including dividends and interest.
3.
Investments in which earnings build tax-free until you withdraw them are called _______.
Choose wisely. There is only one correct answer.
Tax-deferred. "Tax-deferred" means that earnings build tax-free until you withdraw them.
4.
Interest paid on dividends, bonds, and bank accounts is generally taxable.
Choose wisely. There is only one correct answer.
True. Interest paid on dividends, bonds, and bank accounts is generally taxable as income.
5.
A tax-sheltered account always protects your investment interest from taxes.
Choose wisely. There is only one correct answer.
False. A tax-sheltered account lets interest grow within your account without taxes until it is withdrawn. Once it is withdrawn, it may be taxed.