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← Step-Up in Basis
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Question
An investor buys 500 shares of stock at $20 per share and reinvests $600 in dividends over the years at various prices, receiving additional shares. What is the investor's approximate total cost basis?
1
$10,600, because reinvested dividends are treated as additional purchases and added to basis.
2
$10,000 minus the value of all dividends received, since dividends reduce basis.
3
Zero, because the stock has been held long-term and qualifies for a step-up.
4
$10,000, because basis is determined solely by the original purchase price.
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