Mitaya purchased 500 shares of Sundown Inc.,common stock on December 13,2011,at a cost of $3,600.She paid a commission of $150 on the purchase.On February 18,2012,she received 250 shares of Sundown Inc.,common stock as a tax-free dividend.Mitaya sells 600 shares for $3,700 on January 8,2013,and pays a $100 commission on the sale.Mitaya's gain (loss)on the sale is characterized as:

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Mitaya's holding period for the shares sold is more than one year, making it a long-term capital gain. The cost basis for the 600 shares sold is $3,600 (original purchase) + $150 (purchase commission) = $3,750. The sale proceeds are $3,700 - $100 (sale commission) = $3,600. Therefore, the gain is $3,600 - $3,750 = -$150, but since she received 250 shares as a tax-free dividend, the cost basis per share decreases, resulting in a long-term capital gain of $600.

Mitaya Purchased 500 Shares of Sundown Inc