Question

Pandora invested in the Box Mutual Fund by purchasing 1,000 shares on November 9, Year 1. On the first day of every month, the Box Fund pays a dividend that Pandora elects to have reinvested into the Box Fund. On average, Pandora received five additional shares per month. On December 15, Year 2, Pandora sold off her entire interest in the Box Fund (1,065 total shares). How many of the Box Fund shares sold by Pandora will qualify for the long-term holding period

Answer 1

Answer:

Pandora

Box Fund shares qualifying for the long-term holding period:

Total shares qualifying = 1,010

This is made up of:

Initial shares bought on Nov. 9 = 1,000

Reinvested shares on Dec. 1              5

Reinvested shares on Jan. 1               5

The remaining 55 (1,065 - 1,010) shares qualify for short-term holding periods as they lasted less than one year.

Explanation:

A long-term holding period is one year or more with no expiration. This implies that investment, including dividends paid into the account, that has a holding of less than one year will be a short-term hold.

The holding period of an investment is used to determine the taxing of capital gains or losses.