Series 6 - Investment Company And Variable Contracts Products Representative Exam

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An investor purchases shares of a mutual fund. Three months later, the fund has a long-term capital gains distribution. This would be taxed to the investor as:

Ordinary income
A
Net investment income
B
Short-term capital gains
C
Long-term capital gains
D

Explanations

It makes no difference how long the investor held the fund shares; this is a distribution of the fund's long-term gains being passed through to the investor. Therefore, the investor will be taxed at a long-term capital gains rate.

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