Series 7 - General Securities Representative Exam
Preview Mode
A Mutual Fund has made capital gain distributions to shareholders as a result of selling some assets in the portfolio at a gain. Which of the following is true regarding the taxation of the capital gain distributions?
The distributions are tax deferred until a future date based on the amortization method that is used by the investor
A
The distributions become taxable at the time an investor sells their shares in the mutual fund
B
They distributions are not taxable as long as they are reinvested in the fund
C
The distributions are taxable whether or not the proceeds were used to reinvest in new fund shares
D
Explanations
Mutual fund capital gains distributions are taxed in the year of distribution whether or not the proceeds are used for reinvestment. There is no amortization of these distributions