Deirdre sold 112 shares of stock to her brother, James, for $3,584. Deirdre purc

Question

Deirdre sold 112 shares of stock to her brother, James, for $3,584. Deirdre purchased the stock several years ago for $4,592. (Loss amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)

a. What gain or loss does Deirdre recognize on the sale?

b. What amount of gain or loss does James recognize if he sells the stock for $4,816?

c. What amount of gain or loss does James recognize if he sells the stock for $4,032?

d. What amount of gain or loss does James recognize if he sells the stock for $2,800?

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Kase, an individual, purchased some property in Potomac, Maryland, for $207,000 approximately 10 years ago. Kase is approached by a real estate agent representing a client who would like to exchange a parcel of land in North Carolina for Kase’s Maryland property. Kase agrees to the exchange.

What is Kase’s realized gain or loss, recognized gain or loss, and basis in the North Carolina property in each of the following alternative scenarios? (Loss amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)

a. The transaction qualifies as a like-kind exchange and the fair market value of each property is $702,500.

b. The transaction qualifies as a like-kind exchange and the fair market value of each property is $176,000.

Explanation / Answer

1 a. If Dierdre sold shares costing $4,592 for $3,584, the loss on sale recognized would be -$1208.

1 b. If Dierdre sold shares costing $4,592 for $4,816, the profit on sale recognized would be $224.

1 c. If Dierdre sold shares costing $4,592 for $4,032, the loss on sale recognized would be -$560.

1 d. If Dierdre sold shares costing $4,592 for $2,800, the loss on sale recognized would be -$1792.

Accounting Entry would be passed as below:

Bank A/c                                                         Dr.           XX

Loss on sale of shares A/c                           Dr.           XX                             (If Shares are sold at loss)

          To Profit on Sale of shares A/c                                                XX      (If Shares are sold at profit)

            To Investment in Shares A/c                                                   XX

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