Question

1. Sheila sold stock with a basis of $100,000 to Elane, her daughter, for $80,000. Six months later Elane sold the stock to an unrelated party for $130,000. a. What is Sheila’s recognized gain or loss? b. What is Elane’s recognized gain or loss? c. What is Elane’s recognized gain or loss if Elane sold the stock to an unrelated party for $90,000?

Answer 1

A) Sheila's recognised loss of $20000

As stock with basis of $100000 sold to Elane for $80000 that means $100000-$80000=$20000 loss

B) Elane's recognised gain of $50000

As Elane purchased stock for $80000 and sold for $130000 that means $130000-$80000=$50000 gain

C) Elane's recognised gain will be $10000 if Elane sold the stock for $90000

As Elane purchased stock for $80000 and sold for $90000 that means $90000-$80000=$10000 gain

While calculating gain or loss we should always consider the sale price and the purchase price irrespective of the purchase and sale made to any person whether a family member or other person

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