Question

All of the following statements regarding the basis mutual fund shares are true EXCEPT: 1. basis of mutual shares can be determined in the same manner as for other securities. 2.basis of mutual fund shares can be determined using average cost method. 3. taxpayers can specifically identify the shares they want to sell only if they have not previously used the average basis method to sell other shares of the same fund. 4. taxpayers may not use the average basis method if they previously elected to reinvest dividends

Answer 1

Basis of mutual fund can be determined in the similar manner as other securities and taxpayer can specifically identify to sell the shares even if they have not used the average bases method previously.

All the other statement in regards to basis of mutual fund is true.

Correct answer will be option (3)taxpayers can specifically identify the shares they want to sell only if they do not previously used the average base is method to sell others shares of the fund.