Question

Elliot sells some stock to his sister, Nancy, for $4,000. His basis in the stock is...

Elliot sells some stock to his sister, Nancy, for $4,000. His basis in the stock is $6,000.

What is the effect of the sale on Elliot and Nancy if several years later:

Enter all amounts as positive numbers.

a. Nancy sells the stock for $7,000.

The gain on sale by Nancy is $, which is reduced by Elliot's disallowed loss of $___________ and her recognized gain is
$____________

b. Nancy sells the stock for $5,000.

The gain on the subsequent sale is only $. Nancy may only use $_____________ of Elliot's disallowed loss to offset her gain.

c. Nancy sells the stock for $2,000.

Elliot's disallowed loss (CAN OR CANNOT?) be used to (INCREASE OR DECREASE?) Nancy's loss on the subsequent sale. Nancy recognizes a
$__________ loss

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Homework Answers

Answer #1
a)
E N
Particulars Amount ($) Amount ($)
Selling price 4000 7000
Less: Basis -6000 -4000
Realized gain/loss on sale -2000 3000
Deductible loss 0 -2000
Recognized gain 1000
b)
E N
Particulars Amount ($) Amount ($)
Selling price 4000 5000
Less: Basis -6000 -4000
Realized gain/loss on sale -2000 1000
Deductible loss 0 1000
Recognized gain 0
c)
E N
Particulars Amount ($) Amount ($)
Selling price 4000 2000
Less: Basis -6000 -4000
Realized gain/loss on sale -2000 -2000
0 0
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