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Sarah owns 100 shares of Drake,Inc. (adjusted basis of $50,000). On October 11, 2010, she sells the 100 shares for their fair market value of $45,000. On November 5, 2110, she purchases 125 shares of Drake stock for $57,000.

a) What is Sarah's realized and recognized gain or loss on the 100 shares sold on October 11,2010?

b) What is Sarah's adjusted basis for the 125 shares purchased on November 5,2010,

c) How would your answers in (a) and (b) change if Sarah purchased only 75 shares for $34,500 on November 5,2010?

d) How would your answers in (a) and (b) change if Sarah purchased 125 shares on November 15, 2010, instead of November 5, 2010? Which purchase date would you recommend?

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Category:- Accounting Basics
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