Karen purchased 100 shares of Gold Corporation stock for $11,500 on January 1,2012.In the current tax year (2015),she sells 25 shares of the 100 shares purchased on January 1,2012,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

To calculate the recognized gain or loss, we first need to determine the basis (cost) of the 25 shares sold. Since Karen purchased the 100 shares for $11,500, her basis is $115 per share (i.e. $11,500/100 shares).

The 25 shares sold were purchased 25 days before the sale for $3,000. Therefore, her basis for these shares is $3,000/25 = $120 per share.

Since the sale price of the 25 shares was $2,500, Karen incurred a recognized loss of $375 ($115 basis per share - $100 sale price per share).

For the 30 shares purchased 25 days before the sale, Karen's basis is $120 per share, which is calculated above. Therefore, the basis in the new stock is $3,600 (i.e. $120 x 30 shares).

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