In January, Lance sold stock with a cost basis of $26,000 to his brother, James, for $24,000, the fair market value of the stock on the date of sale.Five months later, James sold the same stock through his broker for $27,000.What is the tax effect of these transactions?
A)Disallowed loss to James of $2,000; gain to Lance of $1,000.
B)Disallowed loss to Lance of $2,000; gain to James of $3,000.
C)Deductible loss to Lance of $2,000; gain to James of $3,000.
D)Disallowed loss to Lance of $2,000; gain to James of $1,000.
E)None of these.

Question

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The Answer of In January, Lance sold stock with a cost basis of $26,000 to his brother, James, for $24,000, the fair market value of the stock on the date of sale.Five months later, James sold the same stock through his broker for $27,000.What is the tax effect of these transactions?
A)Disallowed loss to James of $2,000; gain to Lance of $1,000.
B)Disallowed loss to Lance of $2,000; gain to James of $3,000.
C)Deductible loss to Lance of $2,000; gain to James of $3,000.
D)Disallowed loss to Lance of $2,000; gain to James of $1,000.
E)None of these.

In January, Lance Sold Stock with a Cost Basis of $26,000