Chana purchased 400 shares of Tronco Corporation stock for $40,000 in 2014.On December 27,2016,Chana sells the 400 shares for $24,000.Chana purchases 300 shares of Tronco Corporation stock on January 16,2017 for $8,000.Chana's recognized loss on sale of the 400 shares in 2016 and her basis in her 300 new shares are

Question

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To calculate Chana's recognized loss on the sale of the 400 shares, we need to determine her adjusted basis in those shares. Adjusted basis is the original cost plus any adjustments for things like stock splits or dividends.

We know that Chana purchased the 400 shares for $40,000, so her initial basis per share is $100. We don't have any information about adjustments to the basis, so we can assume it remains at $100 per share.

When Chana sells the 400 shares for $24,000, her recognized loss is the difference between the sale price and adjusted basis. The sale price is $24,000, which divided by 400 shares equals $60 per share. So Chana's recognized loss per share is:

$100 (adjusted basis) - $60 (sale price) = $40

Her total recognized loss on the 400 shares is therefore:

$40 (recognized loss per share) x 400 (number of shares) = $16,000

Now we need to determine Chana's basis in her new 300 shares. We know she purchased them for $8,000, so her initial basis per share is:

$8,000 (purchase price) / 300 (number of shares) = $26.67 per share

Because Chana sold all of her original 400 shares before buying the new 300 shares, she cannot use any of the recognized loss from the sale to offset the purchase of new shares. Therefore, her basis in the new shares is simply the purchase price of $8,000.

Thus, the answer is B.

Chana Purchased 400 Shares of Tronco Corporation Stock for $40,000