Question

Ms. Fresh bought 1,000 shares of Ibis Corporation stock for $5,000 on January 15, 2017. On December 31, 2019, she sold all 1,000 shares of her Ibis stock for $4,500. Based on a hot tip from her friend, she bought 1,000 shares of Ibis stock on January 23, 2020, for $3,000. What is Ms. Fresh's recognized loss on her 2019 sale, and what is her basis in her 1,000 shares purchased in 2020A) $-0- LTCL and $3,500 basisB) $200 LTCL and $3,300 basisC) $300 LTCL and $3,200 basisD) $400 LTCL and $3,100 basisE) $500 LTCL and $3,000 basis

Answer 1

Answer:

The answer is option (E). $0 LTCL and $3,500 basis

a). Ms. Fresh recognized a loss of $0 on her 2019 sale

b). Ms. Fresh had a basis of $3,500 in 2020

Explanation:

a). How much loss Ms.French recognized in 2019

Value of shares bought on Jan. 15, 2017=$5,000

In 2019 she sold all shares for=$4,500

Net value of shares in 2019=(Final value-Initial value)

where;

Final value=$4,500

Initial value=$5,000

replacing;

Net value of shares in 2019=(4,500-5,000)=-$500

Ms. Fresh recognized a loss of $500 on her 2019 sale

b). Basis in her 1,000 shares purchased in 2020

She purchased $3,000 worth of stock in 2020

Her basis=$3,000