Question

Juan owned 400 shares of Circle Corporation stock (adjusted basis of $102,000). He sold 200 shares for $40,800. Twenty days later he purchased 200 shares of the same stock for $30,600.

Required:
a. What is Juan's realized and recognized loss?
b. What is his basis in the newly acquired shares?

Answer 1

a. -$10,200

b. $40,800

Step-by-step explanation:

The computation of realized loss is shown below:-

Realized loss = Sales price - Adjusted basis

= $40,800 - ($102,000 × 200 ÷ 400)

= $40,800 - $51,000

= -$10,200

b. The computation of newly acquired shares is shown below:-

Basis for new acquired stock = Purchase price + Disallowed loss

= $30,600 + $10,200

= $40,800

We simply applied the above formula