Ted sells 200 shares of common stock for $2,000. The stock cost Ted $500 several years ago. Ted's realized gain from the sale is only $1,500. Which of the following provides support for this treatment?

Question

Quizplus · Accepted Answer

The Capital Recovery Concept states that when determining the gain from the sale of an asset, the cost of the asset should be recovered first before any realized gain can be recognized. In this case, Ted's cost basis in the stock was $500, so he must recover that amount before recognizing any gain. Therefore, his realized gain of $1,500 is correct.

Ted Sells 200 Shares of Common Stock for $2,000