Question

Christina, who is single, purchased 480 shares of apple incorporated (nasdaq: aapl) stock several years ago for $20,640. during her year-end tax planning, she decided to sell 240 shares of apple for $9,120 on december 30. however, two weeks later, apple introduced its latest iphone, and she decided that she should buy the 240 shares (cost of $9,600) of apple back before prices skyrocket. note: leave no answers blank. enter zero if applicable

what is christina's deductible loss on the sale of 240 shares? what is her basis in the 240 new shares?

Answer 1

Christina has a non-deductible loss of $1,200 due to the wash sale rule, and the basis for her newly purchased 240 shares of Apple stock is $10,800.

Step-by-step explanation:

The question requires us to calculate Christina's deductible loss on the sale of 240 shares and her basis in the newly acquired 240 shares of Apple stock. Christina's initial purchase was 480 shares for $20,640, meaning the cost per share was $43 ($20,640/480 shares). When she sold 240 shares for $9,120, the selling price per share was $38 ($9,120/240 shares). Therefore, the loss per share is $5 ($43 - $38), and the total loss for 240 shares is $1,200 (240 shares x $5 loss per share).

However, since Christina repurchased the 240 shares within 30 days, this transaction is considered a wash sale, and the loss is not deductible. Instead, the loss is added to the cost basis of the newly purchased shares. Therefore, the basis for the 240 new shares is the purchase price plus the non-deductible loss: $9,600 + $1,200 = $10,800.