Question

Benicio purchased stock shares many years ago. his records were destroyed, and he does not know exactly when the purchase was made or what he paid. he sold the shares for $10,000 in 2022. if he is unable to verify what the original basis was, what is his taxable gain?

O $0
O $2,500
O $5,000
O $10,000

Answer 1

Benicio's taxable gain is assumed to be the entire selling price of $10,000, as he cannot prove the original purchase price and the IRS often treats the basis as zero in such cases.

Step-by-step explanation:

When Benicio sold his shares for $10,000 but was unable to verify what the original purchase price (basis) was, for tax purposes, his taxable gain is considered to be the full amount of the sale if no basis can be proved. Therefore, if the purchase price cannot be determined at all, the Internal Revenue Service (IRS) often treats the basis as zero.

This means that Benicio's entire selling price would be recognized as a capital gain. Thus, Benicio's taxable gain would be $10,000, which is the entire amount he received from the sale of the shares.

When a taxpayer cannot substantiate the purchase price of an asset, the cost basis is assumed to be zero, and the entire sale price is generally treated as a gain for tax purposes. However, it is essential to consult a tax professional to explore all possible options and comply with the current tax regulations and policies.