Maria owns 500 units in a mutual fund that invests exclusively in bonds issued by Canadian public corporations. During 2020 the mutual fund received bond interest and paid income distributions of $1.12 per unit. Maria reinvested all of her distributions. The effect on Maria's 2020 Taxable Income is:

Question

Quizplus · Accepted Answer

Maria received $1.12 per unit, which for her 500 units, amounts to $560 in total. Even though she reinvested the distributions, they are still considered taxable income, so her taxable income will increase by $560. Therefore, the correct answer is B) Increase of $560.

Maria Owns 500 Units in a Mutual Fund That Invests