Bobby opened an account with the PDG mutual fund in October ...

By Investopedia Staff AAA
Q:
Bobby opened an account with the PDG mutual fund in October, with an initial deposit of $10,000.  In December, he receives a capital gains distribution from the fund. How will this distribution be taxed?
A) At the long-term gains rate.
B) There will be no taxes due to the investor since he is reinvesting.
C) As ordinary income, since he has not owned shares of the fund for the required holding period
D) As a short-term gain, since he has held the shares for less than 6 months
A:
The correct answer is a)
The mutual fund is passing through part of a gain that it earned by holding securities for the required year-and-a-day or more. Regardless of the individual’s period of holding the mutual fund’s shares, these distributions are taxed at the long-term rate.

RELATED FAQS

  1. In the beginning of this year, the total par value of all CCC-rated bonds were $12 ...

    The correct answer is: d) (i) Default Loss Rate = [($1.3 billion - $625 million)/$1.3 billion] = 51.9% (ii) Dollar Default ...
  2. A manager wishes to construct a portfolio by investing 25% in a stock half as volatile ...

    The correct answer is: b) Step 1. Find Portfolio Beta Beta of the Portfolio = (.25)(.5)+(.25)(2)+(.25)(1)+(.25)(0) = 0.125 ...
  3. Which of the following statements least accurately describes the ways in which a ...

    The correct answer is: a) If the winning party simply terminates the swap, then he'll get zero for it. If a swap has value, ...
  4. Which of the following statements is (are) true with respect to the coefficient ...

    The correct answer is: c) (I) is incorrect because coefficient of determination will always be positive, whereas correlation ...
RELATED TERMS
  1. Series 79

    A examination to ensure a candidate is qualified to become a ...
  2. Research Analyst

    A person who prepares investigative reports on equity securities. ...
  3. Series 34

    An exam required for individuals seeking to engage in off-exchange ...
  4. Financial Advisor

    One who provides financial advice or guidance to customers for ...
  5. Series 23

    An exam offered by the Financial Industry Regulatory Authority ...
  6. Series 28

    An exam given by the Financial Industry Regulatory Authority ...

You May Also Like

Related Articles
  1. Insurance

    Municipal Bond Tips For The Series 7 ...

  2. Retirement

    6 Proven Tips For Series 6 Success

  3. Insurance

    Tips For Passing The Series 6 Exam

  4. Professionals

    Banker Or Broker: Which Career Is Right ...

  5. Professionals

    Breaking Down Financial Securities Licenses

Trading Center