When a Mutual Fund You Own Buys and Sells Securities

question 43

Multiple Choice

When a mutual fund you own buys and sells securities in its portfolio,

• A)you are responsible for paying taxes on the net gains and losses incurred.
• B)the mutual fund is responsible for paying the taxes before distributing your share of the net gains.
• C)the IRS does not levy taxes on mutual funds.
• D)you have a choice on whether to pay taxes on the gains during the current year, or to pay the taxes over a five-year perioD.

---

Definitions:

Controller

The manager of the accounting function of a vertical (business unit).

Managerial Accounting

The practice of analyzing, interpreting, and communicating financial information to managers for the purpose of business decision-making.

Dollar Savings

The amount of money saved as a result of cost reduction, efficiency improvements, or other financial strategies, expressed in dollar terms.

Generally Accepted Accounting Principles

Generally Accepted Accounting Principles (GAAP) are a set of rules and standards used for financial reporting that are adopted by most U.S. companies for preparing their financial statements.