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Funds 104: Taxes on Mutual Fund Income

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1.
Which IRS form reports withdrawals from retirement plans?
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1099-R. This form reports retirement plan withdrawals.
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.
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 of the following are not taxed?
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Capital losses. They are not income.
5.
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.
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