Question

Brittany sold her stock (the basis of $60,000) to her brother, Ridge, for $35,000, the fair market value. Her brother subsequently sells the stock to the third party for $34,000. What is Ridge’s recognized gain or (loss)?

Answer 1

Brittany sold her stock (the basis of $60,000) to her brother, Ridge, for $35,000, the fair market value. Her brother subsequently sells the stock to the third party for $34,000.

Ridge’s recognized gain or (loss) is ($ 1,000).

Step-by-step explanation:

The formula for calculating recognized Gain/[loss] is expressed below:

Recognized Gain/[loss] = Sales Price - Fair Market Value at the time of purchase from Brittany

Recognized Gain/[loss] = $ 34,000 - $ 35,000 = [$ 1,000]

Based on the calculation above, Ridge’s recognized gain or (loss) is ($ 1,000).