Mutual fund investors must pay federal income taxes on

Question

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Mutual fund investors are required to pay federal income taxes on ordinary income dividend distributions, capital gains distributions, and capital gains from selling their shares. Ordinary income dividend distributions are generated from interest and short-term capital gains, while capital gains distributions result from the sale of securities within the mutual fund's portfolio. When an investor sells their mutual fund shares for a profit, they are required to pay capital gains taxes on the difference between the purchase price and the sale price. Therefore, all three options are taxable events for mutual fund investors.

Mutual Fund Investors Must Pay Federal Income Taxes on