Sadie sold 10 shares of stock to her brother,George,for $500 sixteen months ago.Sadie had purchased the stock for $600 two years earlier.If George sells the stock for $700 six months later,what is the amount and character of his recognized gain or loss in the current year?

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Quizplus · Accepted Answer

George sells the stock for $700, which is a $200 gain from what he paid Sadie for it ($500). Since he held the stock for less than a year (six months), it is considered a short-term capital gain. However, since Sadie held the stock for more than a year (two years) before selling it to George, it is considered a long-term capital gain for her. Therefore, the character of George's recognized gain is the same as Sadie's, which is a long-term capital gain. The amount of George's recognized gain is $100 ($200 gain - $100 loss).

Sadie Sold 10 Shares of Stock to Her Brother,George,for $500