Terry Owns Lakeside, Inc

question 5

Short Answer

Terry owns Lakeside, Inc. stock (adjusted basis of $80,000), which she sells to her brother, Jake, for $64,000 (its fair market value). Eighteen months later, Jake sells the stock to Pamela, a friend, for $78,000 (its fair market value). What is Terry's recognized loss, Jake's recognized gain or loss, and Pamela's adjusted basis for the stock?

---

Definitions:

Series Rheostat

An adjustable resistor used in series with a circuit to control the current flow by varying its resistance.

Field Exciter

A device or circuit that provides the necessary DC current to the magnetic field winding of a generator or motor to initiate or enhance its operation.

Differential Setting

In protective relays, refers to the adjustment that determines the difference in current or voltage at which the device will operate to protect electrical equipment.

Compounding

Generally indicates the voltage increase caused by the series field as compared to the voltage drop of the generator.