Over the past 20 years, Alfred has purchased 380 shares of Green, Inc., common stock. His first purchase was in 1995 when he acquired 30 shares for $20 a share. In 2002, Alfred bought 150 shares at $10 a share. In 2017, Alfred acquired 200 shares at $50 a share. Alfred intends to sell 125 shares at $60 per share in the current year (2018). If Alfred's objective is to minimize gain and assuming he can adequately identify the shares to be sold, what is his recognized gain?
A) $1,250
B) $3,520
C) $5,950
D) $6,250
E) None of the above

Question

Quizplus · Accepted Answer

To minimize gain, Alfred should sell the shares with the highest cost basis. The 200 shares purchased in 2017 at $50 each have the highest cost basis. Selling 125 of these shares at $60 each results in a gain of ($60 - $50) * 125 = $1,250.

Over the Past 20 Years, Alfred Has Purchased 380 Shares