Clark recently purchased shares in ABC mutual fund with some funds from the sale of his home ...

By Investopedia Staff AAA
Q:
Clark recently purchased shares in ABC mutual fund with some funds from the sale of his home. The fund has announced that it will pay Clark a $1,200 dividend and $4,300 in capital gains distribution. All of the following are options that Clark can take with the distributions EXCEPT:
a) Payment of dividends in cash, and reinvestment of capital gains in additional shares
b) Reinvestment of both dividends and capital gains in additional shares
c) Defer the distribution until the following year, to take advantage of a lower tax bracket
d) Payment of dividends and capital gains distributions in cash
A:
The correct answer is c).
When an investor receives declared dividends and capital gains distributions, they can implement any of the options mentioned above, with the exception of deferring the distribution until the following year. Unfortunately, taxes must be paid in the same year as the dividend and capital gains distribution occurred, unless the account is a tax-deferred account or retirement plan.

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