When a Mutual Fund You Own Buys and Sells Securities

question 46

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

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Definitions:

Income Taxes

Taxes imposed by the government directly on individuals' or entities' income, increasing as the taxable amount increases.

Constitution

The foundational document setting forth the principles, structures, and processes of a government.

Civic Virtue

The cultivation of habits important for the success of the community. Emphasizes actions that support the collective well-being.

Self-interest

The motivation by individuals to pursue actions or goals that are beneficial to themselves.