In January, Lance Sold Stock with a Cost Basis of $26,000

question 107

Multiple Choice

In January, Lance sold stock with a cost basis of $26,000 to his brother, James, for $24,000, the fair market value of the stock on the date of sale. Five months later, James sold the same stock through his broker for $27,000. What is the tax effect of these transactions?

• A) Disallowed loss to James of $2,000? gain to Lance of $1,000.
• B) Disallowed loss to Lance of $2,000? gain to James of $3,000.
• C) Deductible loss to Lance of $2,000? gain to James of $3,000.
• D) Disallowed loss to Lance of $2,000? gain to James of $1,000.
• E) None of the above.

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Definitions:

Permeable

Permeable describes a material or membrane that allows substances (such as liquids or gases) to pass through it.

Nourished

Being provided with the food or other substances necessary for growth, health, and good condition.

Lamellar Bodies

Membrane-bound organelles found in certain cells, such as type II pneumocytes, containing lipids and proteins important for pulmonary surfactant production.

Stratum Granulosum

Layer of cells in the epidermis filled with granules of keratohyalin.