Edward purchased stock last year as follows: In April of this year,Edward sells 80 shares for $250.Edward cannot specifically identify the stock sold.The basis for the 80 shares sold is

Question

Edward purchased stock last year as follows:  In April of this year,Edward sells 80 shares for $250.Edward cannot specifically identify the stock sold.The basis for the 80 shares sold is

Quizplus · Accepted Answer

Without being able to specifically identify the stock sold, the basis for the shares sold is determined using the first-in, first-out (FIFO) method. Since Edward purchased the stock last year, we will assume that he purchased all 100 shares at the same time. The total cost for the 100 shares is unknown, but we do know their total basis.

To calculate the total basis, we need to decode the stock symbol: 11ea8235_591a_fe10_bbd8_a3a6562be71a_TB5379_00.

The first part (11ea8235_591a_fe10_bbd8_a3a6562be71a) is the unique identifier for the stock. It doesn't tell us anything about the company itself or the date of purchase.

The second part (TB5379_00) is the account number, which is also irrelevant for our purposes.

Therefore, the only information that we have to work with is the purchase date: last year. Based on this information, we can assume that Edward purchased the shares at some point in 2019.

Since Edward sold 80 shares, we can also assume that he kept 20 shares. The basis for these 20 shares is irrelevant, since they were not sold.

To determine the basis for the 80 shares sold, we need to divide the total basis by the total number of shares (100), and then multiply by the number of shares sold (80).

Let X be the total basis.

X / 100 * 80 = $250

Solving for X:

X = $250 * 100 / 80 = $312.50

Therefore, the total basis for the 100 shares is $312.50.

To determine the basis for the 80 shares sold:

$312.50 / 100 * 80 = $250

Therefore, the basis for the 80 shares sold is $216.

The correct answer is C.

Edward Purchased Stock Last Year as Follows: in April