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. Is a financial advisor required to have a degree?

    Discover the minimum educational requirements and financial licenses needed to become a financial advisor in the modern corporate ...
  2. If I have only a limited amount of time to study for the Series 6, what should I ...

    Learn what to focus on when studying for the Series 6 while reviewing important aspects of the exam, including its content ...
  3. What role does the 'chip cycle' play in the electronics sector?

    Read about some of the best and most popular test prep classes for the Series 6 FINRA securities licensing exam, including ...
  4. What does passing the Series 6 enable me to do?

    Learn more about the Series 6, what the examination and license are and what the license enables an individual to buy, sell ...
RELATED TERMS
  1. Series 6

    A securities license entitling the holder to register as a limited ...
  2. Series 79

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

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

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

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

    An exam offered by the Financial Industry Regulatory Authority ...
Hot Definitions
  1. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  4. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  5. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
Trading Center