Question

Sadie sold 10 shares of stock to her brother, George, for $500 16 months ago. Sadie had purchased the stock for $600 two years earlier. If George sells the stock for $700, what are the amount and character of his recognized gain or loss in the current year?

Answer 1

Answer:

there is gain and  receive is $100 long term gain

Explanation:

given data

Sadie sold = 10 shares

Sadie sold shares of stock = $500

time = 16 year ago

Sadie purchased the stock = $600

time = 2 year earlier

George sells  stock = $700

to find out

amount and character of his recognized gain or loss in the current year

solution

we know that George receives dual basis in the stock

his loss  = $600 - $500 = $100

and

if we consider stock is sold at a gain

then  George receives a carryover basis = $600

and

if we consider stock is sold at a loss

then  George receives  = $500

also here his sister basis and holding period is transfer to her brother

so we can say there is gain

and receive is = proceed - carryover basis

receive is = $700 - $600

receive is $100 long term gain