Tonya purchased 500 shares of Home Depot, Inc. common stock on December 13, 2015, at a cost of $3,600. She paid a commission of $150 on the purchase. On February 18, 2017, she received 250 shares of Home Depot, Inc. common stock as a tax-free dividend. Tonya sells 600 shares for $3,700 on January 8, 2018, and pays a $100 commission on the sale. Tonya's gain (loss) on the sale is characterized as:

Question

Quizplus · Accepted Answer

The shares sold were purchased more than one year before the sale date, so the gain is long-term. The gain is calculated as the difference between the sale price and the cost basis, which is the original purchase price plus commissions minus the value of the tax-free dividend. The cost basis is $3,600 + $150 - ($3,700/1,000 * 250) = $3,500. The gain is $3,700 - $3,500 = $200.

Tonya Purchased 500 Shares of Home Depot, Inc