Karen Purchased 100 Shares of Gold Corporation Stock for $11,500

question 66

Multiple Choice

Karen purchased 100 shares of Gold Corporation stock for $11,500 on January 1, 2014. In the current tax year (2017) , she sells 25 shares of the 100 shares purchased on January 1, 2014, for $2,500. Twenty-five days earlier, she had purchased 30 shares for $3,000. What is Karen's recognized gain or loss on the sale of the stock, and what is her basis in the 30 shares purchased 25 days earlier?

• A)$375 recognized loss, $3,000 basis in new stock.
• B)$0 recognized loss, $3,000 basis in new stock.
• C)$0 recognized loss, $3,375 basis in new stock.
• D)$0 recognized loss, $3,450 basis in new stock.
• E)None of the above.

---

Definitions:

Fair-Value Hedge

A hedge that protects against changes in the fair value of an asset, liability, or firm commitment that is attributable to a particular risk.

Forward Contract

A derivative financial instrument where two parties agree to buy or sell an asset at a predetermined future date and price.

Spot Rates

The current price at which a particular security, currency, or commodity can be bought or sold for immediate delivery.

Cash-Flow Hedge

A form of hedge accounting that protects against the variability in cash flows of a recognized asset or liability, or a forecasted transaction.