How interest, dividends, capital gains, and mutual fund distributions are taxed.
This section explains how taxable investment results are classified. Series 6 wants you to distinguish ordinary income, qualified dividend treatment, capital gains, and mutual-fund distribution categories without mixing them together. The exam is usually testing whether you can identify the character of the tax event before worrying about the exact rate or paperwork.
The most useful approach is to ask what produced the tax consequence. Was it interest, a dividend, a realized gain, a distribution, or a sale? Once you identify the source, the correct tax treatment becomes much easier to track.
| Tax category | Typical Series 6 use |
|---|---|
| Interest income | Taxable as ordinary income in a regular taxable account |
| Dividend income | May be taxed differently depending on the dividend type |
| Capital gain or loss | Usually tied to sale price versus cost basis |
| Fund distribution | Can carry income or capital-gain character through to the investor |
Study this section as a classification exercise. Many wrong answers fail because they treat every investment payout as if it were taxed the same way.