Question

g resh bought 1,000 shares of Ibis Corporation stock for $5,600 on January 15, 2017. On December 31, 2019, she sold all 1,000 shares of her Ibis stock for $4,800. Based on a hot tip from her friend, she bought 1,000 shares of Ibis stock on January 23, 2020, for $3,150. 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

Answer:

Ms. Fresh loss will be $800 and Basis in new shares is $3,950

Explanation:

Her Loss on sale of stock would be computed as:

Loss = Sale Value - Purchase price

        = $4,800 - $5,600

        = ($800)

As she repurchased the IBIS stock within the expiry of 30 days, she is not allowed to deduct the LTCL (Long Term Capital Gain ) from gain. So, LTCL will be $0.

The basis in new shares is computed as:

Basis = Previous loss + Price paid

= $800 + $3,150

= $3,950