Ashley,a calendar year taxpayer,owns 400 shares of Yale Corporation stock that she purchased two years ago for $4,000.In the current year Ashley sells all 400 shares of the Yale Corporation stock for $2,400 on December 27.On January 4 of the following year,Ashley purchases 300 shares of Yale Corporation stock for $800.Ashley's recognized loss and her basis in the newly purchased 300 shares of Yale Corporation stock are

Question

Quizplus · Accepted Answer

Ashley's recognized loss is the difference between the sales price ($2,400) and the basis in the stock ($4,000), which is $1,600. Since Ashley sold the stock in the current year, this loss is a capital loss that can be used to offset any capital gains she may have for the year.

When Ashley buys the 300 shares of Yale stock on January 4 of the following year, her basis in the new shares is $800, the amount she paid for them. The recognized loss from the previous year's sale of the 400 shares cannot be used to reduce the basis in the new shares.

Therefore, Ashley's recognized loss is $1,600 and her basis in the newly purchased 300 shares is $800.

Choice B is the correct answer.

Ashley,a Calendar Year Taxpayer,owns 400 Shares of Yale Corporation Stock