Question

"An investor originally invested $10,000 in a mutual fund. Over the course of two years, the fund distributed $200 of dividends and $150 of capital gains, which have been automatically reinvested in additional shares. The fund is now worth $17,500 and the customer wishes to liquidate his holding. What is the aggregate cost basis of the mutual fund holding?"

Answer 1

Answer:

$10,350

Explanation:

Given the following :

Original investment = $10,000

Dividend distributed over two years = $200

Capital gains distributed = $150

Both the dividends and capital gains are Reinvested.

The cost basis of the mutual fund would be the the sum of the taxable investment.

This will be the sum of the original investment including the divudend and capital gains received over the two years.

$(10,000 + 150 + 200) = $10,350