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:

AB Designs

A basic type of research design that compares two groups, A and B, to assess the effect of an intervention or treatment.

Withdrawal Designs

Experimental designs in behavioral research where an intervention is removed to assess its effects on the subject's behavior.

Efficiency Evaluations

Assessments focused on examining how well an entity uses its resources to achieve goals with the least waste of time and effort.

Effectiveness Evaluations

Assessments that measure how well a program, project, or intervention achieves its intended outcomes and objectives.