Question

John bought 1,700 shares of Intel stock on October 18, 2015, for $44 per share plus a $750 commission he paid to his broker. On December 12, 2019, he sells the shares for $63.50 per share. He also incurs a $1,000 fee for this transaction.

a.) What is John's adjusted basis in the 1000 shares of Intel stock?
b.) What amount does John realize when he sells the 1000 shares?
c.) What is the gain/loss for John on the sale of his Intel stock? What is the character of the gain/loss?

Answer 1

Step-by-step explanation:

A. John’s basis in the 1,000 shares of Intel stock is $45,750.

is the purchase price of $30,000 (i.e., 44 × $1,000) plus the $750 commission paid to the broker.

b.On the sale, John realizes $62500. This is the sales price of $63500 (i.e., 1,000 × $63.50)minus the transaction fee of $1,000.

c.John’s gain on the sale is $16,750 which is the amount realized minus his adjusted basis (i.e., $62500 – 45,750). The gain is a long-term capital gain because John held the stock for more than a year before selling