Next, Quinn discusses taxation of investments with the Martins. Their interest income is taxed at 35%, and capital gains and dividends are taxed at 20%. The Martins want to minimize taxes. Based on personal research, Neal makes the following two statements:
Statement 1The after-tax return volatility of assets held in taxable accounts will be less than the pre-tax return volatility.
Statement 2Assets that receive more favorable tax treatment should be held in tax-deferred accounts.
