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Funds 104: Taxes on Mutual Fund Income

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1.
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.
2.
Which IRS form reports withdrawals from retirement plans?
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1099-R. This form reports retirement plan withdrawals.
3.
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.
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.
Which of the following in a mutual fund is not taxable?
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A mutual fund share. Only income is taxable.