CHAPTER 11

Taxable Investment Income

Know the Tax Rates, Strategies, and Traps of Each Investment Option before Going All In

There are many ways in which investments are taxed. It is important to understand how a particular investment will be taxed before jumping in because that taxation will have a real effect on the true earnings that you receive. This chapter focuses on the following areas of investment taxation:

  • Capital gains income
  • Dividend income
  • Interest income
  • Mutual funds—mutually confusing taxation
  • Limited partnerships

Capital Gains Income

When you purchase an investment or business asset, and then later sell it, you generally must report the gain or loss from that sale on your tax return. If you sold the item for more than you paid ...

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