Karen makes the following purchases and sales of stock: Transaction Date Number

Question

Karen makes the following purchases and sales of stock: Transaction Date Number of Shares Company Price per Share Purchase 1-1-2011 300 MDG $ 75 Purchase 6-1-2011 150 GRU 300 Purchase 11-1-2011 60 MDG 70 Sale 12-3-2011 200 MDG 80 Purchase 3-1-2012 120 GRU 375 Sale 8-1-2012 90 GRU 330 Sale 1-1-2013 150 MDG 90 Sale 2-1-2013 75 GRU 500 Assuming that Karen is unable to identify the particular lots that are sold with the original purchase, what is the recognized gain or loss on each type of stock as of the following dates? a. 7-1-2011. b. 12-31-2011. c. 12-31-2012. d. 7-1-2013.

Explanation / Answer

a.7-1-2011.Zero. No sales have occurred.

b.12-31-2011.MDG stock basis (200 x $75) = $15,000; [$16,000 (amount realized) -$15,000 (basis)] = $1,000 realized gain on MDG stock

c.12-31-2012.GRU stock basis (90 x $300) = $27,000; [$29,700 (amount realized) -$27,000 (basis)] = $2,700 realized gain on GRU stock

d.7-1-2013.Second MDG sale: $13,500 (amount realized) - $11,000 (basis) = $2,500realized gain on MDG stock.

(100 x $75) $ 7,500

(50 x $70) 3,500

Basis $11,000

Second GRU sale: $37,500 (amount realized) - $23,625 (basis) = $13,875 realizedgain on GRU stock.

(60 x $300) $18,000.

(15 x $375) 5,625

Basis $23,625

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