Series 7 Exam Question 129: Answer and Explanation

Question: 129

Which of the following are subject to federal taxation?

I. Cash dividends on stock

II. Interest on general obligation bonds

III. Interest on U.S. Treasury Notes

IV. Capital gains on revenue bonds

• A. I and III
• B. I and III
• C. I, III, and IV
• D. I, II, III, and IV

Correct Answer: C

Explanation:

C. Cash dividends on common and preferred stock are taxable on all levels. Interest on U.S. government securities is taxable on the federal level but not the state level. Capital gains on all securities are taxable on all levels. However, interest on municipal bonds, such as general obligation bonds, is exempt from taxation on the federal level.