Frasier Sells Some Stock He Purchased Several Years Ago for $10,000

question 88

Multiple Choice

Frasier sells some stock he purchased several years ago for $10,000 to his brother, Niles, for $6,000.
I.If this is Frasier's only stock transaction, he can deduct only $3,000 of the loss.
II.If Niles sells the stock for $10,000, his taxable gain is $4,000.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Dividends Per Share

The total dividends declared in a period divided by the number of outstanding shares of the company.

Cash Dividends

Payments made by a company to its shareholders out of its profits or reserves.

Originally Issued

Refers to securities that have been sold for the first time to investors directly by the issuing company.

Paid-In Capital in Excess of Par

The amount of capital contributed by shareholders over and above the par value of the shares issued.