The initial price of your investment shares is 582 However o

The initial price of your investment shares is $5.82. However, over the next 4 years, you do not want to purchase the shares until it\'s at least $8.00 a share. What is the annual rate of inflation to increase the price from $5.82 to $8.00? Economist predicts a deflation rate of 3.85 % per year. What is the value of the shares in 4 years if the initial price was $3.82? the price was a 3 piece and a biscuit from KFC in 2013 for each engineer in the office was $2.99. If the inflation on food averaged 4.5% during the last year. In constant value 2012 dollars, this cost is last year\'s (2012) equivalent of what? With the same inflation rate predicted as stated in problem 6, what would be the price of the 3 piece and a biscuit in 2022?

Solution

Ans-

Using the correct tax basis is important especially if you reinvested dividends and capital gains distributions instead of taking the earnings in cash. Reinvesting distributions increases the tax basis of your investment, which you must account for in order to report a lowercapital gain (and therefore pay less tax). If you don\'t use the higher tax basis, you could end up paying taxes twice on the reinvested distributions.

For example, say you bought 100 shares of a stock for $1,000 last year and you reinvested the $100 of dividends distributed from the company. The next year, you received $200 in dividends and capital-gains distributions, which you again reinvested. Since tax law considers these reinvested earnings as paid to you even though you didn\'t actually have the cash in hand, your adjusted cost basis when the stock is sold should be recorded at $1,300 instead of the original purchase price of $1,000. Thus, if the sale price is $1,500, the taxable gain would only be $200 ($1,500 - $1,300) instead of $500 ($1,500 - $1,000). If you record the cost basis as $1,000, you\'ll end up paying more taxes than you have to.

2. For example, if particular corn futures contract happens to be trading at $3.50, while the current market price of the commodity today is $3.10, there is said to be a $0.40 basis.