SIE Exam Question 570: Answer and Explanation

Question: 570

Which of the following passes capital gains, dividends, and interest earned on fund investments directly to shareholders so that it is taxed only at the personal level, and double taxation is avoided?

• A. Private placement
• B. Regulated investment company
• C. Unregulated investment company
• D. Wholly owned subsidiary

Correct Answer: B

Explanation:

A regulated investment company passes capital gains, dividends, and interest earned on fund investments directly to shareholders so that it is taxed only at the personal level, and double taxation is avoided.