Candice Owns a Mutual Fund That Reinvests Her Dividends and Capital

question 1071

Multiple Choice

Candice owns a mutual fund that reinvests her dividends and capital gains earned during the year. The mutual fund reported to her that her share of earnings was: $500 in dividends, $1,500 in short- term net capital gains, and $1,300 in long- term net capital gains. She reported the items on her tax return and paid the appropriate tax on these earnings. If her basis in the fund was $25,000 at the beginning of the year, what is her basis at the end of the year?

• A) $25,000
• B) $27,000
• C) $28,300
• D) $25,500

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Definitions:

Common Stock Subscribed

An agreement by investors to purchase common stock, where the stock is not immediately issued but is promised for future issuance.

Installment

A portion of a debt or loan that is paid at regular intervals, usually monthly, as part of a payment plan.

Child-free

The decision by individuals or couples not to have children, either for personal, environmental, or other reasons.

Representative

A person chosen or appointed to act or speak for another or others, typically in a political or organizational context.