Agatha Harkness wishes to gift mutual funds to her three grandchildren, all of whom are under the age of 6. She wants to minimize any income that will be attributed to her. Which one of the following mutual funds will best accomplish this goal?

Question

Quizplus · Accepted Answer

A growth fund (choice C) that earns its income primarily through capital gains is the best option for minimizing income attributed to Agatha Harkness. Capital gains are taxed more favorably than dividend or interest income, and in many jurisdictions, investments gifted to minors may have their income attributed back to the donor if that income is from dividends or interest. Capital gains, however, are often an exception to this rule, making them a more tax-efficient choice for gifts to minors.

Agatha Harkness Wishes to Gift Mutual Funds to Her Three