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
The distributions become taxable at the time an investor sells their shares in the mutual fund
They distributions are not taxable as long as they are reinvested in the fund
The distributions are taxable whether or not the proceeds were used to reinvest in new fund shares


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