Mr. Quick sold marketable securities with a $112,900 tax basis to his son for $95,000 cash. Two years later, the son sold the securities through his broker for $90,000. Compute the son's loss recognized on sale.

Question

Quizplus · Accepted Answer

The son's tax basis in the securities is $112,900, but he sold them for only $90,000, resulting in a loss of $22,900. However, since the sale was to a related party (his father), the loss is not recognized for tax purposes. Therefore, the son's recognized loss is $0 ($90,000 sales price minus his $95,000 purchase price).

Mr Quick Sold Marketable Securities with a $112,900 Tax Basis