SIE practice questionmediumETFs
A unique tax advantage of ETFs over open-end mutual funds is that ETFs:
- AMust distribute all profits annually
- BGuarantee tax-free returns to investors
- CCan minimize capital gains distributions through in-kind redemption✓ Correct answer
- DAre exempt from U.S. income taxation
Explanation
Why C — Can minimize capital gains distributions through in-kind redemption
ETFs can use in-kind creation and redemption to reduce taxable capital gains distributions. ETF returns are not guaranteed or tax-exempt, and ETFs may still distribute taxable income or gains.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Investment Companies & Packaged Products questions
- A disadvantage of UITs compared to mutual funds is that UITs:
- Which investor is generally eligible to purchase hedge funds?
- If a REIT distributes less than 90% of its taxable income to shareholders, the REIT:
- The price that an investor pays for a closed-end fund share is usually:
- A client plans to invest $25,000 in a mutual fund and wants to maximize long-term returns while minimizing ongoing…
- Class C mutual fund shares are typically most appropriate for:
- An authorized participant in the ETF creation/redemption process primarily helps:
- A mortgage REIT primarily earns income from: