Sadie sold 10 shares of stock to her brother, George, for $590 16 months ago. Sadie had purchased the stock for $780 two years earlier. If George sells the stock for $970, what are the amount and character of his recognized gain or loss in the current year?

Question

Quizplus · Accepted Answer

George's basis in the stock is the amount he paid for it, which is $590. When he sells it for $970, he has a realized gain of $380 ($970 - $590). Since George held the stock for more than one year (16 months is greater than 12 months), this is a long-term capital gain.

Sadie Sold 10 Shares of Stock to Her Brother, George