Question

Karen purchased 100 shares of Gold Corporation stock for $11,500 on January 2, 2018. During 2018, she sells 25 shares of the 100 shares purchased on January 2, 2018, for $2,500. Twenty-five days earlier, she had purchased 30 shares for $3,000. What is Karen's recognized gain or loss on the sale of the stock, and what is her basis in the 30 shares purchased 25 days earlier?

a. $375 recognized loss, $3,000 basis in new stock
b. $0 recognized loss, $3,000 Basis in new stock
c. $0 recognized loss, $3,375 basis in new stock
d. 0$ recognized loss, $3.450 basis in new stock
e. none of the above

Answer 1

Karen incurs a loss of $375 from selling 25 shares originally purchased for $11,500 after selling them for $2,500. The basis in the 30 newly purchased shares is $3,000. Thus, the correct answer is none of the above.

Step-by-step explanation:

Karen's recognized gain or loss on the sale of the stock and her basis in the 30 shares purchased 25 days earlier need to be calculated based on the provided transaction data. First, to determine the gain or loss from selling 25 shares out of the 100 originally purchased, we calculate the per-share cost: $11,500 / 100 shares = $115 per share. Therefore, the cost basis for the 25 shares sold is 25 x $115 = $2,875. By selling those shares for $2,500, Karen recognizes a loss of $2,875 - $2,500 = $375.

The basis for the 30 shares purchased 25 days earlier is simply the purchase price, as there are no additional complexities indicated. Therefore, the basis in the new stock is $3,000. The correct answer, considering the options provided, is none of the above since neither the recognized loss nor the basis matches the options exactly.