[mrsimple]

Hi A71ers,

I’m having trouble wrapping my head around this problem..

Heres the Screenshot of the problem

https://prntscr.com/11c0lx

BUY 100 shares @ $18000 on 4/1/x1

SELL 50 shares @ $7000 on 2/1/x2

BUY 25 Shares @ @3750 on 2/16/x2

To my understanding, wash sale – taxed on gain, not deductible on losses… So the repurchase on 2/16/x2 is a wash sale

There is a 2000 loss on the Sell of the 50 Shares; but once he re-bought 25 shares – shouldn’t there be a gain of $250?

The answer is 1000.

FAR - 44, 63, 65, 77
BEC - 57, 77
AUD - 68, 62, 71, 89
REG - 66, 79

CA Ethics: 94

A setback is a setup for a comeback

[Lisa]

@mrsimple:

Yes the answer is $1000 calculated as follows:

4/1/x1 Bt 1000 at Total cost of $18,000, so the cost basis of 25 shares is $4500

($18,000/100shs = $180 x 25 shares = $4500)

2/1/x2 Sold 50 @$7000 but then on 2/16/x2 Bt 25 shares at $3750, so 25 shares are a wash sale (due to purchase at a loss $3500 vs $3750), so can only use 25 shares for the sale. The remaining 25 shares basis is added to your cost basis.

So Sold 25 shares with total proceeds of $3500

cost basis of those 25 shares was ($4500)

Short Term Capital Loss = ($1000)

AUD 8/04/11: 78
BEC 1/9/12: 73, 4/04/12: 80
FAR 10/25/12: 80
REG 02/25/13: 79
Ethics 100%
VA License Issued 3/2013

[jeff]

I believe I cover wash sales in the free notes/ audio set if you want to check it out

https://www.another71.com/cpa-exam-study-plan

[mrsimple]

@lisa

Just to make sure/double check,

the loss of 250 is not deductible and is added back to the basis of the repurchased asset.

So the new basis is 4000? (2750+ 250)?

Thank you very much for helping out (even though you are done!) Congrats on completing your journey.

@Jeff

Thanks! I have already purchased your Ninja Audio. It comes in handy during my idle times (gym/work)

FAR - 44, 63, 65, 77
BEC - 57, 77
AUD - 68, 62, 71, 89
REG - 66, 79

CA Ethics: 94

A setback is a setup for a comeback

[Author]

Replies