Mitaya purchased 500 shares of Sundown Inc., common stock on December 13, 2012, at a cost of $3,600. She paid a commission of $150 on the purchase. On February 18, 2013, she received 250 shares of Sundown Inc., common stock as a tax-free dividend. Mitaya sells 600 shares for $3,700 on January 8, 2014, and pays a $100 commission on the sale. Mitaya's gain loss) on the sale is characterized as:

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Mitaya's original cost basis for 500 shares is $3,750 ($3,600 + $150 commission). The 250 shares received as a dividend have a basis of $0. The total basis for 750 shares is $3,750. She sells 600 shares for $3,600 ($3,700 - $100 commission). The gain is $3,600 - ($3,750 * (600/750)) = $3,600 - $3,000 = $600. Since the shares were held for more than a year, the gain is long-term.

Mitaya Purchased 500 Shares of Sundown Inc