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:

Manipulated

Altered or controlled in a skillful manner, often referring to variables in scientific experiments or to influence people's behaviors or perceptions.

Dependent Variables

In an experiment, these are the variables that are tested and measured to see if they are affected by changes in the independent variables.

Progressive Relaxation

A relaxation technique that involves tensing and then slowly relaxing each muscle group to reduce stress.

Stress Management

Techniques and strategies used to help individuals cope with and reduce stress in their lives, aiming to improve overall psychological and physical well-being.