Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

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What form is used to report a mutual fund shareholder's tax liability?

1040
1099
W-2
1098

The correct answer is: 1099

The correct form used to report a mutual fund shareholder's tax liability is the 1099 form, specifically the 1099-DIV. This form is essential because it details the dividends and capital gains distributions that a mutual fund has paid to its shareholders during the tax year. When investors receive distributions from mutual funds, those payments might be taxable, and the 1099-DIV form helps the shareholder understand how much they need to report on their tax returns. It provides information about both ordinary dividends and qualified dividends, along with capital gains distributions, which play a critical role in accurately determining the tax liability for a mutual fund shareholder. The other options serve different purposes: 1040 is the individual income tax return form, W-2 is used by employers to report wages paid to employees and taxes withheld, and 1098 is used to report mortgage interest paid. Each of these forms is important in tax reporting but does not specifically relate to mutual fund dividends and capital gains.