Karen purchased 100 shares of Gold Corporation stock for $11,500 on January 1, 2004. In the current tax year, she sells 25 shares of the 100 shares purchased on January 1, 2004, 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?
A)$375 recognized loss, $3,000 basis in new stock.
B)$0 recognized loss, $3,000 basis in new stock.
C)$0 recognized loss, $3,375 basis in new stock.
D)$0 recognized loss, $3,450 basis in new stock.
E)None of the above.

Question

Quizplus · Accepted Answer

Karen's basis in the 100 shares of Gold Corporation stock is $11,500, so her per-share basis is $115.

For the 25 shares she sold, she received $2,500, which means she sold them for $100 per share. Her basis in those shares was $115 per share, so she has a recognized loss of $15 per share, or $375 total.

For the 30 shares she purchased 25 days before selling the other shares, her basis is the amount she paid for them, which is $3,000. There is no recognized gain or loss on this purchase since she has not sold these shares yet.

Therefore, the correct answer is C. Karen has a recognized loss of $375 on the sale of the 25 shares, and her basis in the 30 shares she purchased 25 days earlier is $3,000.

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