Leonard has the following transactions.Leonard purchased 1,500 shares of stock o
ID: 2444450 • Letter: L
Question
Leonard has the following transactions.Leonard purchased 1,500 shares of stock on January 15, 2008 at $10 per share.Leonard purchased an additional 500 shares of stock in the same company on June 15, 2008 at $15 per share.Leonard was given 250 shares of stock in the same company by his grandmother on December 15, 2008. His grandmother passed away on December 30, 2008, leaving all of her remaining assets to Leonard and his brother Sheldon.They each received 2,000 shares of stock in the same company.The value of the company stock on December 15 was $25 per share and the value on December 30 was $30 per share.Their grandmother was the founder of the company and paid $1 per share for all of her shares in the company.Leonard did not want to run the company and so began selling his shares in January 2009.On January 22, 2009, Leonard sold 2,000 shares for $35 per share. On December 15, 2009 Leonard sold an additional 2,000 shares for $5 per share (after Sheldon had run the business into the ground).
Required: Calculate the each gain or loss on the above transactions and determine the net total includible in Leonard’s taxable income for 2009. Also calculate how many shares, if any Leonard has left and what is his basis in those shares as of the end of 2009.
Explanation / Answer
Answer : Gain or loss of Leonar
Particulars Qty Rate Amount
Share puchased at January 15, 2008 1500 10 15000
Share puchased at June 15, 2008 500 15 7500
Share received from his Grand mother
December 15, 2008 250 0 0
Share received of his Grand mother
December 30, 2008 2000 0 0
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Total 4250 22500
________________________________________
By using FIFO method
(1)
Sale the share on January 22 ,2009 2000 35 70000
Less Share cost 2000 22500
----------------------------------------------------------------------------- Net Gain 47500
---------------------------------------------------------------------------------------
(2)
Sale the share on December 15 ,2009 2000 5 10000
Less Share cost 2000 0
----------------------------------------------------------------------------- Net Gain 10000
---------------------------------------------------------------------------------------
Net Balance should be add include in income. = 47500+10000 =57500
Balance shares
Shares at December 31, 2008 4250
Less Shares sold 4000
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Shares Balance 250
-------------------------
Leonerd have 250 shares with 0 basis.
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