Question

For the scenario described (b. $1,250), what is the recognized gain when Jethro sells the 125 shares from the lot acquired in 2011?

A) $0
B) $1,250
C) $6,250
D) $7,500

Answer 1

The recognized gain when Jethro sells the 125 shares from the lot acquired in 2011 is $7,500. The recognized gain is calculated by subtracting the adjusted basis from the selling price.

Step-by-step explanation:

The recognized gain when Jethro sells the 125 shares from the lot acquired in 2011 is $7,500 (option D).

To calculate the recognized gain, we need to determine the adjusted basis of the shares. The adjusted basis is the original cost of the shares plus any adjustments, such as commissions or fees. Since no adjustments are mentioned in the scenario, the adjusted basis is equal to the original cost.

Therefore, the recognized gain is calculated by subtracting the adjusted basis of the shares (which is $0 because Jethro acquired them in 2011) from the selling price of $7,500. This results in a recognized gain of $7,500.