Mitaya purchased 500 shares of Sundown Inc., common stock on December 13, 2016, at a cost of $3,600. She paid a commission of $150 on the purchase. On February 18, 2017, she received 250 shares of Sundown Inc., common stock as a tax-free dividend. Mitaya sells 600 shares for $3,700 on January 8, 2018, and pays a $100 commission on the sale. Mitaya's gain (loss) on the sale is characterized as:

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Mitaya's total cost for the 500 shares was $3,600 plus a $150 commission, totaling $3,750. The 250 shares received as a tax-free dividend have a $0 cost basis but maintain the original purchase date for holding period purposes. When she sells 600 shares for $3,700 and pays a $100 commission, her net proceeds are $3,600. Since the sale occurred more than a year after the original purchase, the gain of $600 ($3,600 - $3,000 cost basis for 600 shares) is characterized as a long-term capital gain.

Mitaya Purchased 500 Shares of Sundown Inc