Question

Jerry and Julie are brother and sister. Jerry sold stock to Julie for $5,000, its fair market value. The stock cost Jerry $10,000 5 years ago. Also, Jerry sold Carol (an unrelated party) stock for $2,000 that cost $10,000 3 years ago. What is Jerry's recognized loss before the $3,000 capital loss limitation?

(A) $5,000
(B) $13,000
(C) $14,000
(D) 0
(E) $8,000

Answer 1

Answer: Loss = $8000

Option (e) is correct.

Given:

Jerry sold stock to Julie for $5,000

The stock cost Jerry $10,000

Jerry sold Carol stock for $2,000 that cost $10,000

Here; it should be noted that, Jerry and Julie are brother and sister.

whereas;

Jerry and Carol are unrelated party.

Here, the total loss will be computed in regards with the unrelated party:

Loss = Price of stock - Selling price

Loss = $10000 - $2000

Loss = $8000