Question

On November 15, 2019, Tim, a cash basis taxpayer, gave his Daughter Nancy 1000 shares of JP Morgan common stock, which Tim purchased on June 30, 2015 for $60,000. On the date of the gift the stock was selling on the NY Stock Exchange for $46 per share. On December 03, 2019, the corporation declared a 1 for 1 stock dividend payable on December 10, 2019, to shareholders of record as of November 22, 2019. On January 17, 2020, Nancy sold 1,500 shares of JP Morgan common stock that she received from her father and from the stock dividend for $18 per share.
A) What is Nancy's recognized gain or loss on the sale of the 1,500 shares on January 17, 2020?
B) What is Nancy's total basis in the remaining shares? Explain.

Answer 1

Answer:

Following are the responses to the given question:

Explanation:

For question A:

Particulars            Numbers of shares               price/share       TotalAomunt

$Share\ \ sales \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 1500 \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 18 \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 27000\\\\Share \ \ cost \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 1000 \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 30 \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 30000$

                                              $500 \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 30 \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 15000$

profit/Loss                    0                                                                      -18000

For question B:

Remaining Share            500                             30                      15000

In this question, the average cost of the per share is 30/action, and when her fathers gave her 1000 stocks at 60 and the company then gave $1:1$shares as a dividend.