In 2016, Mrs Owens paid $50,000 for 3,000 shares of a mutual fund and elected to reinvest year-end dividends in additional shares. In 2016 and 2017, she received Form 1099s reporting the following.
If Mrs Owens sells 1,000 shares in 2018 for $22 per share and uses the average basis method, compute her recognized gain.

Question

Quizplus · Accepted Answer

Total basis = $57,950 (original cost + dividend reinvestments) and average basis per share is $17.09 ($57,950/3,390 shares). Gain per share is $4.91 ($22 sales price - $17.09 basis). Total gain is $4,910 ($4.91 per share × 1,000 shares).
$\begin{array} { c c c c c } 
\begin{array} { c } 
\text { Reinvested } \
\text { dividends }
\end{array} & \begin{array} { c } 
\text { Shares } \
\text { purchased }
\end{array} & \begin{array} { c } 
\text { Price per } \
\text { share }
\end{array} & \begin{array} { c } 
\text { Total shares } \
\text { owned }
\end{array} \
2016 & \$ 4,800 & 240 & \text { S } 20 & 3,240 \
2017 & \$ 3,150 & 150 & \text { S } 21 & 3,390
\end{array}$

In 2016, Mrs Owens Paid $50,000 for 3,000 Shares of a Mutual