FINRA Series 6

Answer: B - The statement regarding the required distribution of income by a regulated investment company that is true is that under 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. This preferential treatment is due to expire on Dec. 31, 2010 unless it is extended. Only long-term capital gains earned by the company can only be distributed once a year. Short-term capital gains are generally distributed along with dividends-usually once a quarter. Even if an investor elects to reinvest dividend and capital gain income rather than receiving a check, the investor must still pay taxes on the income he would have received had he not made the election.