Deirdre sold 153 shares of stock to her brother, James, for $4,131. Deirdre purchased the stock...
Deirdre sold 153 shares of stock to her brother, James, for $4,131. Deirdre purchased the stock several years ago for $5,661. (Loss amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)
a. What gain or loss does Deirdre recognize on the sale?
Recognized gain or loss------------------?
b. What amount of gain or loss does James recognize if he sells the stock for $5,967?
Recognized gain or loss------------------?
c. What amount of gain or loss does James recognize if he sells the stock for $4,896?
Recognized gain or loss------------------?
d. What amount of gain or loss does James recognize if he sells the stock for $3,366?
Recognized gain or loss------------------?
Homework Answers
a.
Though Deirdre realizes a $1,530) loss, she is not allowed to recognize any of the loss because she sold the stock to a related party (her brother). See the following computation:
| Description | Amount | Explanation |
| (1) Amount realized | $4,131 | Given |
| (2) Basis | $5,661 | Given |
| (3)Gain/(Loss) realized | ($1,530) | (1) - (2) |
| (4)Disallowed loss | ($1,530) | no recognized loss on related party sale |
| Gain/ (Loss) recognized | $0 | (3) - (4) |
b.Gain $306
c.$0
d.Loss ($765)
Computation:
| Description | Part b | Part c | Part d | Explanation |
| (1) Amount realized | $5,967 | $4,896 | $3,366 | Given |
| (2) Adjusted basis | $4,131 | $4,131 | $4,131 | Given |
| (3) Realized gain /(loss) | $1,836 | $765 | ($765) | (1) - (2) |
| (4) Benefits of Deirdre's ($1,530) disallowed loss | $1,530 | $765 | $0 | Lesser of (3) (If a loss then $0) or $600(the amount of Deirdre's disallowed loss) |
| Recognized gain / (loss) | $306 | $0 | ($765) | (3) - (4) |
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