Question

Sinin bought 200 shares of thited stock on Janwary 1, 20x3, for $50 per ahare, with a brokerage fee ef Sta0. Then keven seeis all 200 shares for $75 per ahare on December 12, 20x3. The brokerage foe on the saie was 5130 What is the amount of the aainfioss Kovin must report on his 20×3 tax return? What is the character of the gain/loss?

Answer 1

Step-by-step explanation:

To calculate the gain or loss and the character of the gain/loss for Kevin's stock transactions, we need to consider the cost basis (purchase price plus brokerage fees) and the selling price minus the brokerage fees. Here's the breakdown:

Purchase:

- Number of shares: 200

- Purchase price per share: $50

- Total cost of shares: 200 shares * $50/share = $10,000

- Brokerage fee for purchase: $30

Sale:

- Number of shares sold: 200

- Selling price per share: $75

- Total selling price of shares: 200 shares * $75/share = $15,000

- Brokerage fee for sale: $130

Now, let's calculate the gain or loss and determine the character of the gain/loss:

1. Calculate the Cost Basis:

Cost basis = Total cost of shares + Brokerage fee for purchase

Cost basis = $10,000 + $30 = $10,030

2. Calculate the Net Proceeds:

Net proceeds = Total selling price of shares - Brokerage fee for sale

Net proceeds = $15,000 - $130 = $14,870

3. Calculate the Gain or Loss:

Gain or loss = Net proceeds - Cost basis

Gain or loss = $14,870 - $10,030 = $4,840

4. Determine the Character of the Gain/Loss:

To determine the character of the gain/loss, we need to consider whether the holding period of the shares was short-term or long-term. If the holding period was one year or less, it is considered a short-term gain/loss. If the holding period was more than one year, it is considered a long-term gain/loss.

Since the purchase date is January 1, 20x3, and the sale date is December 12, 20x3, the holding period exceeds one year. Therefore, the gain/loss is considered a long-term gain/loss.

So, Kevin must report a long-term gain of $4,840 on his 20x3 tax return.