Question

Ms. Fresh bought 1,000 shares of Ibis Corporation stock for $5,000 on January 15, 2017. On December 31, 2019, she sold all 1,000 shares of her Ibis stock for $4,500. Based on a hot tip from her friend, she bought 1,000 shares of Ibis stock on January 23, 2020, for $3,000. What is Ms. Fresh's recognized loss on her 2019 sale, and what is her basis in her 1,000 shares purchased in 2020?

Answer 1

A) $-0- LTCL and $3,500 basis

Step-by-step explanation:

Option A is correct because it is a wash stock sale. Wash stock sell means the loss is canceled with another sell or purchase of stock. In that case, when on December 31, 2019, Ms. Fresh sold 1,000 shares with a loss of ($5,000 - $4,500) = $500, which is a normal loss. When she purchased new 1000 shares with a price of 3000, the recognized loss would be ($3000 + $500) = $3,500