Question

Ms. Fresh bought 1,000 shares of Ibis Corporation stock for $5,000 on January 15, 2013. On December 31, 2015 she sold all 1,000 shares of her Ibis stock for $4,500. Based on a hot tip from her friend, she bought 1,000 shares of Ibis stock on January 23, 2016 for $3,000. What is Ms. Fresh's recognized loss on her 2015 sale and what is her basis in her 1,000 shares purchased in 2016?

$-0- LTCL and $3,500 basis
$200 LTCL and $3,300 basis
$300 LTCL and $3,200 basis
$400 LTCL and $3,100 basis
$500 LTCL and $3,000 basis

Answer 1

$-0- LTCL and $3,500 basis

Step-by-step explanation:

Since the stock is bought back within 30 days, so no loss would be considered

So, the loss would be equal to

= Sale value - purchased value

= $4,500 - $5,000

= ($500)

No loss of $500 would be considered. It will get added to the adjusted basis

Now the adjusted basis would be equal to

= Bought shares value + loss recognized

= $3,000 + $500

= $3,500

Hence, all other options are wrong except a.

Answer 2

Option (A) is correct.

Step-by-step explanation:

If shares are bought back within 30 days from the previously purchase shares sold, then the loss will not be considered, but it will increase the Adjusted basis for new shares purchase .

1000 Share purchase = $5000

less: 1000 shares sold = $4500

Realized loss = $500

LTCL = $0

Adjusted basis for new 1000 shares:

= $3000 + $500 (realised loss)

= $3500