[Anonymous]

I am needing some help understanding this problem I ran across in Becker. For whatever reason Becker’s explanation is not clicking.

Sands purchased 100 shares of Eastern Corp. stock for $18,000 on April 1 of the prior year. On February 1 of the current year, Sands sold 50 shares of Eastern for $7,000. Fifteen days later, Sands purchased 25 shares of Eastern for $3,750. What is the amount of Sand’s recognized gain or loss?

a. $500

b. $2,000

c. $0

d. $1,000 (answer)

Thanks for the help.

[Myredstapler]

I did not co e up with this answer but here it is:

Basis of the stock purchased on April 1, prior year: $180/share

Value of the stock sold on Feb. 1, following year: $140/share

Loss is equal to $2,000 (50 shares x $40/share).

HOWEVER, when Sands bought 25 of the same shares 15 DAYS after selling, he just disallowed himself half of that $2,000 loss. The $1,000 loss is a wash sale, and therefore not deductible.

[Anonymous]

I understand it now thanks!

[Author]

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