Question

Christina, who is single, purchased 500 shares of Apple Inc. stock several years ago for $21,000. During her year-end tax planning, she decided to sell 250 shares of Apple for $9,250 on December 30. However, two weeks later, Apple introduced its latest iPhone, and she decided that she should buy the 250 shares (cost of $9,750) of Apple back before prices skyrocket.

1. What is Christina's deductible loss on the sale of 250 shares? What is her basis in the 250 new shares?

2.Assume the same facts, except that Christina repurchased only 125 shares for $4,875. What is Christina’s deductible loss on the sale of 250 shares? What is her basis in the 125 new shares?

Answer 1

ANSWER

1)

Loss on sale of shares =($9,250 -(21,000*250/500))

=($1,250)

The loss on sale is not allowed as deduction for tax purpose.

The basis in new shares is the purchase price plus loss on sale of shares =$9,750 +$1,250

=$11,000

The deductible loss	$0
Basis	$11,000

2)

Deductible loss = 50% of loss

=50%*1,250

Deductible loss =$625

The new basis = $4,875+$625

=$5,500

The deductible loss	$625
Basis	$5,500

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