Question

Taxpayer A buys 100 shares of Blue Oak stock and sells them later. The result of this transaction is a(n):

a) Capital gain
b) Capital loss
c) Dividend income
d) Tax deduction

Answer 1

Taxpayer A's sale of Blue Oak stock for more than the purchase price results in a capital gain, which is the increase in value between the time the stock was purchased and sold.

Step-by-step explanation:

When Taxpayer A buys 100 shares of Blue Oak stock and then sells them later, the result of this transaction depends on whether they sold the stock for more or less than they paid. If they sold the stock for more, they have realized a capital gain, which is the increase in the stock value between when it was bought and sold. Dividend income, on the other hand, comes from direct payments made by the firm if they decide to distribute profits to shareholders, and it is not directly related to the buying and selling of the stock itself. Therefore, the result of Taxpayer A's stock transaction would be a capital gain, if they sold the shares at a higher price than they bought them.