Two Years ago, Stephanie Johnason, from Berkeley, California invested $1000 by buying 125 ($8 per share NAV) in the Can't Lose Mutual Fun, an aggressive growth no-load mutual fund. Last year, she made two additional investments of $500 each (50 shares at $10 and 40 shares at $12.50). Stephanie reinvested all of her dividends. So Far, the NAV for her investment has risen from $8 per share to $13.25. Late in the year, she sold 60 shares at $13.25
1. What were the proceeds from Stephanie's sale of the 60 shares?
2. To use the Internal Revenue Service's average cost basis method of determining the average price paid for one share, begin by calculating the average price paid for the shares. In this instance, the $2000 is divided by 215 shares (125 shares + 50 shares + 40 shares). What was the average price paid by Stephanie?
3. To finally determine the average-cost basis of shares sold, you multiply the average price per share times the number of shares sold - in this case 60. What is the total cost basis for Stephanie's 60 shares?
4. Assuming that Stephanie has to pay income taxes on the difference between the sales price for the 60 shares and their cost, how much is this difference?