Max bought $7,000 of fund units.

The adjusted cost base of a mutual fund investment includes the original purchase cost plus reinvested distributions. Reinvested dividends are treated as if the investor received the distribution and then used it to buy additional units. Because those dividends are taxable when distributed in a non-registered account, adding them to ACB prevents double taxation when the fund is later sold. Max’s original investment was $7,000. He also received $1,000 of reinvested dividends, so the adjusted cost base becomes $8,000. The current market value of $10,000 is not the ACB; it is the proceeds or value before disposition. Option C ignores the reinvested dividends, while Option D reflects the unrealized gain. The correct ACB is $8,000.