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Which of the following is not an advantage of owning mutual funds? A. All of the options are advantages of mutual funds. B. They offer small investors the benefits of diversification. C. They treat income as 'passed through' to the investor for tax purposes. D. They offer a variety of investment styles

Sagot :

(C) They treat income as 'passed through' to the investor for tax purposes.

What are mutual funds?

  • A mutual fund is an investment vehicle that is professionally managed and collects money from a number of investors to buy securities.
  • The phrase is frequently used in the US, Canada, and India, while open-ended investment companies in the UK and SICAVs in Europe are comparable global structures.
  • Mutual fund distributions, whether made in the form of cash payments or reinvested in additional shares, must be taxed if shares are held in a taxable account.
  • Following the end of each calendar year, the funds submit IRS Form 1099-DIV detailing distributions made to shareholders.

Who are investors?

  • A person who invests money does so in the hope of earning a profit or gaining an advantage in the future.
  • The majority of the time, the investor purchases some kind of property using these assigned funds.

What is tax?

  • Tax compliance refers to policy actions and individual behavior aimed at ensuring that taxpayers are paying the right amount of tax at the right time and securing the correct tax allowances and tax reliefs.
  • A tax is a mandatory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or national).
  • Around 3000–2800 BC, the first recorded taxation was enacted in ancient Egypt.

Therefore, "(C) They treat income as 'passed through' to the investor for tax purposes" is not the advantage of owning mutual funds.

Know more about mutual funds here:

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