Question

3. Assuming an activity is deemed to be a hobby, discuss the order and limits in which expenses must be deducted. 12 points 4. Sandra sold 500 shares of Wren Corporation to Bob, her brother, for its fair market value. She had paid $26,000 for the stock. Calculate Sandra's and Bob's gain or loss under the following circumstances: Sandra sold the shares to Bob for $20,000. One year later, Bob sold them for $18,000. a. b. Sandra sold the shares to Bob for $30,000. One year later, Bob sold them for $27,000. Sandra sold the shares to Bob for $20,000. One year later, Bob sold them for $28,000. c. Copyright Cengage Leaming. Powered by Cognero. Page 3

Answer 1

	Sandra had paid $26000 for the 500 shares
a	Sandra sold to Bob = $20000-$26000 (purchase) = $6000 Loss
b	Sandra sold to Bob = $30000-$26000 (purchase) = $4000 Gain
c	Sandra sold to Bob = $20000-$26000 (purchase) = $6000 Loss
	One year Bob sold out
a	Bob sold $18000-$20000 (purchase) = $2000 Loss
b	Bob sold $27000-$30000 (purchase) = $3000 Loss
c	Bob sold $28000-$20000 (purchase) = $8000 Gain