Question

Dahlia is in the 32 percent tax rate bracket and has purchased the following shares of Microsoft common stock over the years:

Date Purchased	Shares	Basis
7/10/2008	480	$	18,240
4/20/2009	380		16,644
1/29/2010	580		18,328
11/02/2012	330		12,276

If Dahlia sells 1,040 shares of Microsoft for $60,320 on December 20, 2018, what is her capital gain or loss in each of the following assumptions? (Do not round intermediate calculations.)

b. She uses the specific identification method and she wants to minimize her current year capital gain.

(Capital gain/loss?)

Answer 1

To reduce capital gains, stocks with highest cost per share is selected. Cost per share of various lots is:

Date Purchased	Shares	Basis	Per share
07-10-2008	480	18,240	38.00
4/20/2009	380	16,644	43.80
1/29/2010	580	18,328	31.60
11-02-2012	330	12,276	37.20

Now the sale is first 380 from 2009 lot, 480 from 2008 lot and the balance 180 from 2012 lot.

Cost of 1040 shares is:

Date Purchased	Shares	Basis	Per share	Sale units	Basis of shares sold
07-10-2008	480	18,240	38.00	480	18,240
4/20/2009	380	16,644	43.80	380	16,644
1/29/2010	580	18,328	31.60
11-02-2012	330	12,276	37.20	180	6,696
				1040	41,580

Capital gain = 60,320 - 41,580 = 18,740