Ten years ago, Ms. Dee purchased 1,000 shares of Fox common stock for $123 per s

Question

Ten years ago, Ms. Dee purchased 1,000 shares of Fox common stock for $123 per share. On June 2 of the current year she sold 400 shares for $94 per share. Compute Ms. Dee’s recognized loss on sale assuming that:

A. She purchased 500 shares of Fox common stock on June 28 for $96 per share. what is the recognized loss

B. She purchased 500 shares of Fox common stock on August 10 for $101 per share. what is the recognized loss

C. Compute Ms. Dee’s tax basis in the 500 shares purchased in a.

D. Compute Ms. Dee’s tax basis in the 500 shares purchased in b.

Explanation / Answer

Wash sale loss is an exemption when capital loss is realized but not recognized.

A wash sale loss exists when a security is sold for a loss and is repurchased within 30 days before or after the sale date. This loss may not be deducted, but is added to the basis of the repurchased asset.

A.

Realized loss = 400 shares * ($123-$94) per share = $11,600

As the common stock is repurchased before 30 days after the sale date, no loss is recognized.

Recognized loss = 0

B.

Realized loss = 400 shares * ($123-$94) per share = $11,600

As the common stock is repurchased after 30 days after the sale date, all the loss is recognized.

Recognized loss = $11,600

C.

Tax basis = Purchase price + Unrecognized loss

= (500 shares * $96 per share) + $11,600

= $59,600

D.

Tax basis = Purchase price

= 500 shares * $101 per share

= $50,500

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