Question

Ms. Fresh bought 1,000 shares of ABC Corporation stock for $5,000 on January 15, 2011. On December 31, 2015 she sold all 1,000 shares of her ABC stock for $4,500. Based on a hot tip from her friend, she bought 1,000 shares of ABC stock on January 23, 2015 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 2015?

A. $-0- LTCL and $3,500 basis
B. $200 LTCL and $3,300 basis
C. $300 LTCL and $3,200 basis
D. $400 LTCL and $3,100 basis
E. $500 LTCL and $3,000 basis

Answer 1

Ms. Fresh's recognized loss on her 2015 sale is $500, and her basis in her 1,000 shares purchased in 2015 is $3,000.

Step-by-step explanation:

Ms. Fresh's recognized loss on her 2015 sale is $500, and her basis in her 1,000 shares purchased in 2015 is $3,000.

To calculate the recognized loss, we need to subtract the selling price from the basis. The selling price is $4,500 and the basis is the purchase price of $3,000. So the recognized loss is $4,500 - $3,000 = $1,500. However, the recognized loss cannot exceed the purchase price. Therefore, the recognized loss is limited to $3,000.

As for the basis in the 1,000 shares purchased in 2015, it is simply the purchase price of $3,000.