Free FINRA-SERIES-6 Web TestEngine Demo

Q14 Single choice

Tex Payor is an investor in the Invest4U Mutual Fund. The manager of the fund, fearing a substantial decline in the stock market, sold a lot of the fund's holdings to lock in profits. As a result, the fund earned a lot of long-term capital gain income.

Which of the following statements is true regarding the tax treatment of this income?

A
Tex must pay taxes on that portion of the long-term capital gain income that Invest4U distributes to him.
B
Tex must pay taxes on his proportionate share of the long-term capital gain income earned by Invest4U, whether distributed or not.
C
Tex must pay taxes only on dividend income distributed by Invest4U.The mutual fund itself pays tax on
any capital gains it earns.
D
None of the above is a true statement.

FINRA-SERIES-6 Web TestEngine demo