Series 7 practice questionmediumTax Implications — Cost Basis
An investor made the following purchases of ABC stock: 100 shares at $30 in January, 100 shares at $40 in March, and 100 shares at $50 in June. Using FIFO, if the investor sells 150 shares, what is the cost basis of the shares sold?
- A$5,500
- B$5,000✓ Correct answer
- C$6,000
- D$6,500
Explanation
Why B — $5,000
FIFO assumes the first shares purchased are the first shares sold. Selling 150 shares uses the first 100 shares bought at $30 ($3,000) plus 50 shares from the March lot at $40 ($2,000), for a total cost basis of $5,000.
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