Answer Happy

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