SIE practice questionhardMutual Funds - Switching
An investor exchanges shares from one mutual fund to another within the same fund family. For tax purposes, this is considered:
- AExempt from IRS reporting
- BA tax-free exchange
- CTax-deferred until withdrawal
- DA taxable event✓ Correct answer
Explanation
Why D — A taxable event
Switching funds, even within the same family, is a taxable transaction. B, C, and D do not apply; the IRS treats this as a sale and purchase for tax purposes.
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