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?

Question

Quizplus · Accepted Answer

Her total earnings from the mutual fund are $500 + $1500 + $1300 = $3300. Since she reinvests her dividends and capital gains, her basis in the mutual fund is increased by this amount. Therefore, her ending basis in the mutual fund is $25,000 + $3300 = $28,300. The correct answer is D.

Candice Owns a Mutual Fund That Reinvests Her Dividends and Capital