Sheila Sells Stock,which Has a Basis of $12,000,to Her Daughter

question 124

Multiple Choice

Sheila sells stock,which has a basis of $12,000,to her daughter for $7,000,the stock's fair market value.Subsequently,the daughter sells the stock to an unrelated party for $5,000.Which of the following is true for Sheila and her daughter?

• A) \[\begin{array} {| l | l |}
• \hline\text { Sheila } & \text { Daughter } \\
• \hline \text { recognizes no loss } & \text { recognizes loss of } \$ 2,000 \\
• \hline
• \end{array}\]
• B) \[\begin{array} {| l | l |}
• \hline\text { Sheila } & \text { Daughter } \\
• \hline \text { recognizes no loss } & \text { recognizes loss of } \$ 5,000 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | l | l | }
• \hline \text { Sheila } & \text { Daughter } \\
• \hline \text { recognizes loss of } \$ 3,000 & \text { recognizes loss of } \$ 5,000 \\
• \hline
• \end{array}\]
• D) \[\begin{array} {| l| l| }
• \hline\text { Sheila } & \text { Daughter } \\
• \hline \text { recognizes loss of } \$ 3,000 & \text { recognizes loss of } \$ 2,000 \\
• \hline
• \end{array}\]

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Definitions:

Acquisition

The process where one company purchases most or all of another company's shares to gain control over it.

Acquisition

The process of acquiring control of another company or business entity through purchase or merger.

Shares Outstanding

The total number of shares of a company that have been issued and are currently owned by shareholders.

Market Value

The current price at which an asset or company can be bought or sold in the marketplace.