1.5 Investment Income And Expenses Flashcards
Investment Income comes from ____
An ASSET that you’re “keeping.”
You’re making income from something you’re “holding.”
Cash deposits, investments from securities, stocks, bonds, mutual funds, dividends, and capital appreciation, are examples of _____?
INVESTMENT INCOME
Interest income is reported to the taxpayer on _______ form?
1099- INT (Interest)
Interest income is reported to the taxpayer by the financial institution, or another payor, it the interest amount is_____?
$10 or more for the year.
The taxpayer must report interest in income if the amount exceeds _____!
$1,500
Where must the taxpayer report interest?
Schedule B, Interest and Ordinary Dividends
Why do people like to invest in MUNICIPAL BONDS?
Because the interest isn’t taxable.
Although Municipal Bonds are exempt from Federal taxes, what taxes might they be subject to?
State and local income taxes.
Interest on “Federally guaranteed” state and local obligations ____
Is generally, taxable.
What is a CD?
Certificates of Deposit
A certificate of deposit (CD) is a savings account that holds a fixed amount of money for a fixed period of time, such as six months, one year, or five years, and in exchange, the issuing bank pays interest. When you cash in or redeem your CD, you receive the money you originally invested plus any interest. Certificates of deposit are considered to be one of the safest savings options. A CD bought through a federally insured bank is insured up to $250,000. The $250,000 insurance covers all accounts in your name at the same bank, not each CD or account you have at the bank.
What are MUTUAL FUNDS?
A mutual fund is an open-end professionally managed investment fund that pools money from many investors to purchase securities.
A mutual fund represents a pool of money invested in a portfolio of different securities.
Mutual funds can be purchased directly from the investment fund or through a broker.
The main types of mutual funds are stock funds, bond funds, money-market funds, and target-date funds.
What are SECURITIES?
Securities are financial contracts, such as shares or bonds, that grant the owner a stake in an asset. They have two key features: they give certain rights to the owner; and they can be traded in the financial markets.
“Interest” is a form of income earned from:
A) Tips
B) Charitable Contributions
C) Deposits
E) All of the Above
C - Deposits
What are Dividends?
Distributions that are reported as TAXABLE INCOME!
What do DISTRIBUTIONS on deposits, shared accounts in cooperative banks, credit unions, domestic savings and loan associations, and mutual savings banks, ALL have in common?
All are reported as TAXABLE INCOME!
