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:

Appeal to Majority

A logical fallacy where the popularity of an idea is used as evidence of its truth or correctness.

Argument

A set of statements or reasons put forth to support a conclusion.

Fallacy

An error in reasoning that renders an argument invalid or unsound, often due to misleading premises or irrelevant considerations.

Life on Mars

The hypothesis or scientific inquiry into the potential existence of life, past or present, on the planet Mars.