Question

A customer executes the following transactions during the same year: May 1st: Aug. 1st: Aug. 20th: Buy 100 XYZ at $54 per share Buy 100 XYZ at $40 per share Sell 100 XYZ at $41 per share After the transactions are effected, the customer's cost basis in XYZ stock is:

Answer 1

The cost basis of the customer in the stock of XYZ is equivalent to the acquisition cost of shares, that is, $5,400, and is not affected by the short-term capital gain or loss.

What is short-term capital gain?

A capital gain is considered to be a shorter-term when the asset holds for a period of less than one year. When the holding period extends by one year, then the same capital gain is treated as a long-term capital gain.

The cost basis of the customer in XYZ's stock is $5,400 which is determined by taking the product of 100 shares at a price of $54 per share. It will not be affected by the short-term capital loss of $1,300, which is computed as the difference between sales cost of $4,100 and purchase cost of $5,400 respectively. As a result, the cost basis should be the same as the cost of purchasing the shares.

Therefore, the customer's cost basis is $5,400 in the stock of XYZ company.

Learn more about the cost basis in the mentioned link;

brainly.com/question/17248304

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