Final answer:
Portfolio investments are not always taxed at ordinary rates; long-term capital gains can be taxed at preferential rates, and specific accounts like 401(k)s offer tax deferrals, with some investment incomes being tax-exempt.
Step-by-step explanation:
The statement that portfolio investments are always taxed at ordinary rates is false. It is not always true that portfolio income, such as dividends and capital gains, are taxed at ordinary income tax rates. In many jurisdictions, including the United States, long-term capital gains from these investments may be taxed at preferential rates compared to short-term capital gains or ordinary income.
Furthermore, special accounts like 401(k)s offer deferral of taxes, meaning taxes are not paid until the funds are withdrawn in retirement, indicating a preferential tax treatment for specific investment vehicles. Additionally, certain types of passive investment income, such as municipal bond interest, may be exempt from federal taxation. Each investment type should be evaluated based on its specific tax implications.