Question
A mutual fund investor is in the 37% federal ordinary marginal income tax bracket, and has the following transaction activities in her mutual fund account:
A mutual fund investor is in the 37% federal ordinary marginal income tax bracket, and has the following transaction activities in her mutual fund account: Date Shares Transaction Unit Cost Acquired Lot# Bought/(Sold) Activity Price Basis
01/15/2015 1 300 Initial Purchase $ 13.00 $ 3,900
05/31/2016 2 28 $560 distribution 20.00 560
12/29/2017 3 25 $225 distribution 16.00 375
04/03/2018 4 100 Second purchase 15.00 1,900
06/13/2021 5 105 $2,100 distribution 20.00 2,100
11/03/2021 6 50 Third purchase 17.00 850
Total 608 15.93 $ 9,685
Assuming that the investor wishes to raise $500 immediately to make a trip to her brother's college graduation, which lot should she sell to minimize the capital gains tax payable on the sale, if the current unit price of the mutual fund is $24 today (May 2022)?
Group of answer choices
Lot #1 must be sold as the default rule for mutual fund sales is the FIFO method.
The investor must use the average cost method to determine the gain or loss
Lot #6 must be sold as the default rule for mutual fund sales is the LIFO method
Lot #2 should be sold to raise the needed funds
Lot #5 should be sold to raise the needed funds
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