Smart Prep for FINRA SIE: Securities Industry Essentials Practice Questions

How are dividends taxed in a traditional Individual Retirement Account (IRA)?

A) Taxed as ordinary income

B) Not taxed

C) Taxed at a flat rate of 10%

D) Taxed as gift tax

Select an option above to see an explanation here.

A) Dividends in a traditional IRA are taxed as ordinary income upon withdrawal. B) Dividends in a traditional IRA are not tax-free, they are taxed as ordinary income when withdrawn. C) There is no flat tax rate for dividends in a traditional IRA, they are taxed as ordinary income when withdrawn. D) Dividends in a traditional IRA are not subject to gift tax, they are taxed as ordinary income when withdrawn.