Question

Required information [The following Information applies to the questions displayed below.) John bought 2,000 shares of Intel stock on October 18, 2014, for $50 per share plus a $750 commission he paid to his broker. On December 12, 2018, he sells the shares for $72.50 per share. He also incurs a $1,000 fee for this transaction. a. What is John's adjusted basis in the 2,000 shares of Intel stock? Adjusted basis

Answer 1

1. The adjusted basis of the Intel stock for John is the purchase price plus commission which is (2,000 x $50) + $750 = $100,750.
2. John realizes a gross amount of $2,000 x $72.50 = $145,000 and a net amount less transaction fees of $144,000. The net amount will be the final realization.
3. 1. The gain or loss will be determined as the difference between the above two (i.e. net proceeds $144,000 – adjusted basis $100,750 = $43,250 gain).

2. The period of holding is from October 18, 2014 to December 12, 2018 which is greater than one year and hence will be a long term capital gain.