Question

sadie sold 12 shares of stock to her brother george for $610 16 months ago. saide had purchased the stock for 820 two years earlier. if george sells the stock for 1030 what are the amount and character of his recognized gain or loss in the current year

Answer 1

Categorization of shares of stock as long term or short term based on 12 months period, if holding period exceeds 12 months it shall be called as long term, otherwise short term. The sale of such shares are recognized as long term gain or loss.

In the instant case George sells the shares (holding period is 16 months) for $ 1,030. The Gain on the transaction is ($1,030 selling price - $ 610 purchase cost) $420 it should be called as Long term capital gain because holding period of George is 16 months.

$420 treated as long term capital gain in the current year.