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:

Definite-Term Lease

A type of lease that expires at the end of a specified term.

Specified Term

A specified term refers to a fixed or clearly defined period or condition detailed in a contract or agreement.

Absolute Tenancy

A type of property lease where the tenant possesses total and unrestricted rights to the property for the lease period.

Type Of Lease

Refers to the different kinds of leasing agreements available, such as operational leases, finance leases, and capital leases, each with its specific terms and conditions.