Question

Mr. Slake sold 1,580 shares of publicly traded DDL stock (tax basis $49,240) for $40,000 cash on February 13. He paid $43,000 cash to purchase 1,600 DDL shares on March 2. Compute Mr. Slake's loss recognized on the February 13 sale and determine his tax basis in the 1,600 shares. Multiple Choice No loss recognized; $52,240 basis No loss recognized; $40,000 basis $9,240 loss recognized; $43,000 basis No loss recognized; $49,240 basis

Answer 1

Answer:

$9,240 loss recognized

$43,000 basis

Explanation:

Tax basis of share purchase is the cost of share together with any tax related to this purchase.

Mr. Slake's loss recognized on the February 13 sale is $9,240 = total cost of 1,580 share purchased in the past - total amount collected from sales of these share =  $49,240 - $40,000 = $9,240

His tax basis in purchase of 1,600 shares on Mar 2 is  $43,000, the total cost he paid to acquire 1,600 shares