Finra Exam Series-6 Topic 10 Question 70 Discussion

Actual exam question for Finra's Series-6 exam

Question #: 70
Topic #: 10

Which of the following statements regarding the required distribution of income by a regulated investment company are true?

ABoth short-term and long-term capital gains earned by the company can be distributed only once a year.

BUnder current tax laws, qualifying dividends distributed to the company's investors are taxable to those investors at a preferential rate-i.e., either 0% or 15%, depending on the investor's marginal tax rate.

CIf an investor in the investment company has elected to reinvest his dividend and capital income in the company rather than receiving a check, then the investor is not required to pay taxes on the reinvested funds.

DBoth A and B are true statements.

Show Suggested Answer

Suggested Answer: B

Mr. Nomad's friend can engage in the activities described in Selections I and II only. A limited power of attorney gives Mr. Nomad's friend the authority to buy and sell securities on Mr. Nomad's behalf, but not to make any cash withdrawals. He would need a full power of attorney to be able to do so.

by Quentin at Jan 26, 2024, 09:58 AM

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Rebeca

1 months ago

Both A and B, huh? Looks like the exam writers are really trying to squeeze our brains. I hope they don't expect us to remember all these complex rules!

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Werner

19 days ago

I know, it's a lot to remember. But we have to make sure we understand all the rules for the exam.

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Lemuel

2 months ago

Reinvest and pay no taxes? Sounds like a loophole straight out of a cartoon villain's playbook. I'm definitely going to look into that one!

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Terry

3 days ago

Yeah, it seems like a way to avoid paying taxes on your earnings.

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Luis

20 days ago

User 2: Yeah, it does seem like a loophole. But I wonder if there are any catches.

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Noe

22 days ago

User 1: I heard about that too, sounds too good to be true.

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Justine

27 days ago

I think it's crazy that investors can avoid paying taxes by reinvesting.

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Cornell

27 days ago

User 2: Yeah, it does seem a bit sketchy. I wonder if it's really legal.

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Nu

28 days ago

User 1: I heard about that loophole too, sounds too good to be true.

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Elena

1 months ago

I heard about that too! It does sound like a loophole.

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Claribel

2 months ago

I'm not sure about that, I think C) is also true because if you reinvest your dividends, you don't have to pay taxes on them.

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Billi

2 months ago

Ah, the magic of preferential tax rates on qualifying dividends. It's like the government is giving us a secret discount on our investments.

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Anna

2 months ago

I agree with Macy, because short-term and long-term capital gains can only be distributed once a year, and qualifying dividends are taxed at a preferential rate.

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Kerrie

2 months ago

Wait, so we can distribute capital gains only once a year? That's like saying I can only eat chocolate once a year - it just doesn't make sense!

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Macy

2 months ago

I think the answer is D) Both A and B are true statements.

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