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jonny [76]
3 years ago
6

An investor purchased 100 shares of the cdl growth and income fund 3 years ago when the pop was $12 and the nav was $11.50. all

distributions have been taken in cash. the investor submits an order to liquidate this account when the next computed pop is $11 and the nav is $10.45. the tax consequences of this liquidation would be a
Business
1 answer:
Norma-Jean [14]3 years ago
3 0

The investor will show a capital loss of $155.

We gather the following information from this question:

Pop of the fund three years ago : $12

NAV of the fund three years ago : $11.50

Current Pop : $11

Current NAV : $10.45

Number of shares : 100 shares.

We need to calculate capital loss or gain on the 100 shares in the mutual fund.

While taking the cost per unit, <u>we need to consider the public-offer-price (pop) into consideration, since an investor can only buy the shares at pop</u>.

Similarly, while selling the shares, the <u>shareholder can liquidate his position by selling back to the mutual fund at the NAV prevailing at the end of the business day</u> on which he wants to sell.

So, the formula to calculate capital gain or loss is:

Capital gain or (loss) = (NAV per unit at liquidation - POP at purchase ) * No. of shares

Capital gain or (loss) = ($10.45 - $12 ) * 100

Capital gain or (loss) = ($155)

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solution

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