Question

Jennifer purchased 100 shares of Basil Corporation stock for $11,500 on January 1, 2004. In the current tax year, she sells 25 shares of the 100 shares purchased on January 1, 2004, for $2,500. Twenty-five days earlier, she had purchased 30 shares for $3,000. What is Jennifer's recognized gain or loss on the sale of the stock, and what is her basis in the 30 shares purchased 25 days earlier?

Answer 1

Jennifer's recognized loss on the sale of the stock is -$375 and her basis in the 30 shares purchased 25 days earlier is $3,300.

Step-by-step explanation:

To calculate Jennifer's recognized gain or loss on the sale of the stock, we need to determine her basis in the sold shares and compare it to the sale price.

First, let's calculate her basis in the 25 shares sold. Jennifer purchased 100 shares at $11,500, so her cost basis per share is $115. The basis for the 25 shares sold is therefore $115 * 25 = $2,875.

Next, we calculate the recognized gain or loss. The sale price of the 25 shares is $2,500. Since her basis is $2,875, Jennifer has a recognized loss of $2,875 - $2,500 = -$375 on the sale of the stock.

In regards to her basis in the 30 shares purchased 25 days earlier, the basis will be the purchase cost plus any transaction fees. Jennifer purchased the 30 shares for $3,000, but we also need to account for the transaction fees. If the transaction fee per share is $10, the total cost for the 30 shares would be $3,000 + ($10 * 30) = $3,300.

Therefore, Jennifer's basis in the 30 shares purchased 25 days earlier is $3,300.