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Series 6

Unit 3 QQ3.k

QuestionAnswer
Total Return The return that would be achieved if dividends and capital gains distributions were reinvested.
Selling Dividends Illegal Practice of inducing customers to buy mutual fund shares by implying that an upcoming distribution will benefit them.
Cost Basis The price paid for an asset, including any commission or fees, used to calculate capital gains or losses when asset is sold.
Valuing Fund Shares If the amount received is greater than the cost base, the investor reports a taxable gain, if less a loss is reported. Total value of fund shares- cost base= taxable gain or loss.
First In, First Out (FIFO) An accounting meathod used to assess a co. Inventory, in which it is assumed that the first goods aquired are the 1st to be sold. The same meathod is used by the IRS to determine cost basis for tax purposes.
Share Identification Accounting Method An accounting meathod that ids the specific shares selected for liquidation in the event that an investor wishes to liquidate shares. The difference between the buying and selling prices determines the investors tax liability.
Average Cost Basis Divide total cost of all shares owned by total number of shares. Shareholder may not change his mind to use this method without IRS permission.
Wash Sale Selling a security at a loss for tax purposes and, within 30 days before or after purchasing the same or substantially identical security. The IRS disallows the claim loss.
Substantially Identical Refers to any other security with the same investment performance likelihood as the one being sold.
Regulated Investment Company An invtmt co to which subch M of the Internal Revenue Code grants spcl status that allows the flow-through of tax consequences on a dist to shareholders. If 90% of its income is passed through to the shareholders, the co is not subj to tax on this income.
Created by: ericjrolon