Rachael purchased 300 shares of Smelt, Inc. stock for $25 per share. At the end of the year, the stock price has risen to $30 per share. Rachael does not recognize taxable income even though there has been a $1,500 increase in wealth.

Question

Quizplus · Accepted Answer

Rachael does not recognize taxable income unless she sells the shares and realizes a capital gain. Since she has not sold the shares, the increase in value is considered unrealized and not taxable.

Rachael Purchased 300 Shares of Smelt, Inc