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CSI IFC Exam - Topic 7 Question 1 Discussion

An investor purchases units of an equity fund for $17.60. In which of the following circumstances would an investor potentially owe taxes on capital gains?
A) The fund is sold today for $18.80 per unit and the proceeds are reinvested
B) The fund is currently valued at $18.80 per unit
C) A dividend distribution is reinvested into additional units of the same fund
D) The fund is currently valued at $16.45 per unit

CSI IFC Exam - Topic 7 Question 1 Discussion

Actual exam question for CSI's IFC exam
Question #: 1
Topic #: 7
[All IFC Questions]

An investor purchases units of an equity fund for $17.60. In which of the following circumstances would an investor potentially owe taxes on capital gains?

Show Suggested Answer Hide Answer
Suggested Answer: A

Capital gains are realized when an investor sells a fund at a profit. Selling units at $18.80 (purchased at $17.60) triggers a taxable capital gain in a non-registered account. The feedback from the document states:

'Capital gains are generated when an investor sells an investment for more than the price paid; for example, selling a stock at a profit will generate a capital gain. Capital gains are not realized when an investment goes up in price; a sale must occur.'


by Noel at Jan 27, 2026, 01:50 PM

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Michell
5 hours ago
D is definitely not taxable. Losses don't trigger taxes.
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Hyun
5 days ago
B is tricky. Just a valuation, no sale yet.
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Carmelina
11 days ago
Agreed, A makes sense. Reinvesting doesn't avoid taxes.
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Glennis
16 days ago
I think A is the right answer. Selling today means realizing gains.
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Gerald
2 months ago
D) means no gains, so no taxes there.
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Kenneth
2 months ago
C) is also tax-free since it's just reinvesting dividends.
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Malcolm
2 months ago
Wait, so B) doesn't count? That seems odd.
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Isidra
3 months ago
Totally agree, reinvesting doesn't avoid taxes!
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Una
3 months ago
A) would trigger capital gains tax.
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Lucia
3 months ago
Taxes, ugh. Can't we just enjoy our investment gains without the government taking a cut?
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Jerry
3 months ago
Haha, the correct answer is obvious. These questions are a piece of cake for us finance pros!
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Lauran
3 months ago
B) and D) are not correct. The fund's current value does not trigger a taxable event unless the units are actually sold.
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Timothy
3 months ago
C) is also a good option. Dividend distributions, even if reinvested, are considered taxable income.
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Yoko
4 months ago
A) is the correct answer. Selling the fund for a higher price than the original purchase price would result in a capital gain, which would be taxable.
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Socorro
4 months ago
I practiced a similar question where selling triggered taxes, so I'm leaning towards A, but I need to double-check my notes on reinvestments.
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Lenna
4 months ago
I feel like C could be tricky because reinvesting dividends doesn't usually count as a taxable event, but I could be wrong.
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Dominga
5 months ago
I remember something about capital gains being realized only when an asset is sold, so maybe B and D wouldn't apply here.
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Rosendo
5 months ago
I think option A might be the right answer since selling the fund would trigger a capital gains tax, but I'm not entirely sure about the reinvestment part.
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Lisha
5 months ago
I feel pretty confident about this one. I just need to remember the basic principles around capital gains and when they apply. Reviewing the study materials should help me nail this question.
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Barrett
5 months ago
For option A, the sale would definitely trigger capital gains taxes, since the sale price is higher than the purchase price. The other options are a bit trickier, but I think I can work through them.
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Colton
5 months ago
I'm a little confused on the dividend reinvestment part. Does that count as a sale even if the money stays in the fund? I'll need to double-check the rules on that.
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Barney
6 months ago
Okay, let me see here. I think the key is whether the fund has been sold or not. If it's just the current value, that doesn't trigger taxes, right?
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Luann
6 months ago
Hmm, this seems like a straightforward capital gains question. I'll need to think through the different scenarios and when taxes would be owed.
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