Sally owns 700 shares of Fashion Styles Clothing common stock.Sally purchased the 700 shares as follows:

As of December 29,2017,Sally has not sold any securities.She needs to send a tuition payment of $5,200 to her daughter's boarding school in Zurich before year-end.Since the Fashion Styles Clothing stock is selling for $13 per share,Sally plans to dispose of 400 shares to cover the tuition.Ignoring commissions and transaction costs,what is the optimal tax result of selling 400 shares?

Question

Sally owns 700 shares of Fashion Styles Clothing common stock.Sally purchased the 700 shares as follows:
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As of December 29,2017,Sally has not sold any securities.She needs to send a tuition payment of $5,200 to her daughter's boarding school in Zurich before year-end.Since the Fashion Styles Clothing stock is selling for $13 per share,Sally plans to dispose of 400 shares to cover the tuition.Ignoring commissions and transaction costs,what is the optimal tax result of selling 400 shares?

Quizplus · Accepted Answer

Sally's cost basis in the 700 shares of Fashion Styles Clothing common stock is not given, so we cannot determine her gain or loss on the sale of 400 shares. However, since she has held the stock for over a year, the sale would be considered a long-term capital gain or loss. Since Sally plans to sell the shares at a lower price than she purchased them for, she will incur a long-term capital loss of $200 (400 shares x ($13 selling price - assumed cost basis)).

Sally Owns 700 Shares of Fashion Styles Clothing Common Stock