On December 1, 20X7, George Jimenez needed a little extra cash for the upcoming

Question

On December 1, 20X7, George Jimenez needed a little extra cash for the upcoming holiday season, and sold 250 shares of Microsoft stock for $70 per share less a broker's fee of $200 for the entire sale transaction. Prior to the sale, George held the following blocks of Microsoft stock (associated broker's fee paid at the time of purchase):

If his goal is to minimize his current capital gain, how much capital gain will George report from the sale?

Acquisition Date Number of Shares Market Price When Acquired Broker's Fee 1/1/X4 300 $55 per share $350 6/30/X6 300 $65 per share $350

Explanation / Answer

Using The Specfic identification method George will report only 757 of gain instead of 3257 of gain he would have reported using the fifo method

Amount Realized 250*70-200 =17300 17300 Adjusted basis FIFO 300 shares *35 +250 16850/300 =56.17 56.17 250*56.17 14043 Specfic Identification (300*65+350)/300 66.17 250*66.17 16543 Amount Of gain FIFO 17300-14043 3257 Specfic Identification 17300-16543 757

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