Mr. Schmidt purchased 250 shares of Doss Limited on February 1 of the current year for $20 per share. On May 1 of the current year, he purchased 100 more shares for $25 per share. On June 20 of the current year, Mr. Schmidt sells 100 shares for $15 per share. His allowable capital loss on June 20 is $643.

Question

Quizplus · Accepted Answer

To determine the allowable capital loss, we need to calculate the adjusted cost base (ACB) of the shares sold.

The ACB of the 100 shares sold would be calculated as follows:

ACB = (250 shares x $20 per share) + (100 shares x $25 per share) 
ACB = $5,000 + $2,500 
ACB = $7,500

Since Mr. Schmidt sold the 100 shares for $15 per share, the total proceeds from the sale would be:

$15 per share x 100 shares = $1,500

To calculate the capital loss, we need to subtract the proceeds from the ACB:

Capital loss = ACB - proceeds 
Capital loss = $7,500 - $1,500 
Capital loss = $6,000

Therefore, the allowable capital loss on June 20 would be $6,000, not $643.

Mr Schmidt Purchased 250 Shares of Doss Limited on February