Question

"On June 12th, a customer buys 100 shares of DEF stock at $49 per share. On June 30th of the same year, the customer sells the stock at $39. On July 10th of the same year, the customer buys DEF stock at $42. The customer's cost basis in DEF stock is:"

Answer 1

Answer:

The customer's cost basis in DEF stock is:

$4,900

Explanation:

The stock price = $49 per share

Number of shares = 100

The value on June 12 = $4,900 ($49 x 199)

The DEF stock cost basis is the amount which is initially paid for the purchase of the 100.  When the DEF stock is sold, the tax liability is determined by how much is spent to buy the security (cost basis) and the sales price.  Since the security is sold at a price lower than the original purchase price, the difference is not taxable as a capital gain.