Over the past 20 years, Alfred has purchased 380 shares of Green, Inc., common stock.His first purchase was in 1991 when he acquired 30 shares for $20 a share.In 1996, Alfred bought 150 shares at $10 a share.In 2011, Alfred acquired 200 shares at $50 a share.Alfred intends to sell 125 shares at $60 per share in the current year.If Alfred's objective is to minimize gain, what is his recognized gain?
A)$1,250.
B)$3,520.
C)$5,950.
D)$6,250.
E)None of the above.

Question

Quizplus · Accepted Answer

To minimize gain, Alfred should sell the shares with the highest cost basis first. He should sell 125 shares from the 200 shares purchased in 2011 at $50 each. The cost basis for these 125 shares is $6,250 (125 shares x $50). The sale proceeds are $7,500 (125 shares x $60). The recognized gain is $1,250 ($7,500 - $6,250).

Over the Past 20 Years, Alfred Has Purchased 380 Shares