Becky Bell owned common stock in a corporation that she purchased two years ago for $25,000. On June 6, 2012, Becky sold the stock for its $11,000 fair market value to her son, Max Monroe. On December 19, 2012, Max sells the stock to an unrelated party for its $13,000 fair market value. How much gain or loss will Becky and Max recognize on their respective income tax returns for 2012?
A) $0 and $0, respectively.
B) ($14,000) and $0, respectively.
C) ($14,000) and $2,000, respectively.
D) $0 and $2,000, respectively.
E) None of the above.

Question

Quizplus · Accepted Answer

Becky has a $14,000 realized loss which is not recognized because the sale is to a related party. Max's $2,000 gain is reduced by the disallowed loss. So neither party recognizes gain or loss.

Becky Bell Owned Common Stock in a Corporation That She