Melonie purchased 100 shares of Wake Corporation stock for $6 per share on August 3, 2016. On December 18, 2017, Melonie sells all 100 shares for $4 per share. On January 5, 2018, Melonie purchases 50 shares of Wake stock for $5 per share. What is the basis of the 50 shares Melonie holds on January 5, 2018?

Question

Quizplus · Accepted Answer

The basis of the 100 shares purchased in 2016 is: $6/share x 100 shares = $600.

The amount received from selling the 100 shares in 2017 is: $4/share x 100 shares = $400.

Melonie incurred a loss of $200 on the sale of the 100 shares.

Therefore, the adjusted basis of the 50 shares purchased on January 5, 2018 is: 
$600 original basis - $200 loss on sale of previous shares = $400.

Melonie purchased 50 shares for $5/share, so the total cost for the new shares is: $5/share x 50 shares = $250.

Since this is less than the adjusted basis of $400, the basis of the 50 shares held on January 5, 2018 is $400.

Therefore, the correct answer is D: $450.

Melonie Purchased 100 Shares of Wake Corporation Stock for $6