Question

Sadie sold 10 shares of stock to her brother, George, for $560 16 months ago. Sadie...

Sadie sold 10 shares of stock to her brother, George, for $560 16 months ago. Sadie had purchased the stock for $720 two years earlier. If George sells the stock for $880, what are the amount and character of his recognized gain or loss in the current year?

  • None of the choices are correct.

  • $320 short-term capital gain.

  • $160 long-term capital gain.

  • $160 short-term capital gain.

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Homework Answers

Answer #1

Answer:

$160 long-term capital gain.

Explanation:

given information:

Sadie sold = 10 shares

price of stock Sadie sold to George 16 months ago = $560

Price of stock Sadie purchased 2 year earlier = $720

Price at which George sold the stock = $880

we have to find out amount and character of his recognized gain or loss in the current year,

Sadie's loss of $160 (720 - 560) on sale to George is deferred and her brother receives a dual basis in the stock. If he sells the stock at a gain, he receives a $720 carryover basis from Sadie. If he sells the stock at a loss he receives a $560 cost basis in the stock. Sadie's basis and holding period are transferred to George, so he receives a $160 ($880 proceed less $720 basis) long-term gain on the sale.

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