Karen purchased 100 shares of Gold Corporation stock for $11,500 on January 1, 2014. In the current tax year (2017), she sells 25 shares of the 100 shares purchased on January 1, 2014, for $2,500. Twenty-five days earlier, she had purchased 30 shares for $3,000. What is Karen's recognized gain or loss on the sale of the stock, and what is her basis in the 30 shares purchased 25 days earlier?

Question

Quizplus · Accepted Answer

Karen's sale of 25 shares results in a wash sale because she purchased substantially identical stock (30 shares) within 30 days before the sale. Therefore, the loss is not recognized, and the disallowed loss is added to the basis of the new shares. The original cost of the 25 shares sold is $2,875 (25 shares x $115 per share). The loss of $375 ($2,500 - $2,875) is disallowed and added to the basis of the 30 new shares, making the new basis $3,375 ($3,000 + $375).

Karen Purchased 100 Shares of Gold Corporation Stock for $11,500