Question

2.         Michonne makes the following stock purchases:

                          Date            Stock                                                  Purchase (FMV)

                          

                          1/3/X1         10 shares Apple                                     $175K                  

                          1/3/X1         10 shares Berkshire Hathaway         $160K

                          2/3/X1         10 shares Berkshire Hathaway         $175K                  

                          6/28/X1       75 shares Kmart                                    $100K

                          12/31/X1     15 shares Apple                                     $225K

                          3/8/X2         25 shares Apple                                     $275K

                          4/3/X2         10 shares Apple                                     $175K                  

                          6/2/X2         75 shares Kmart                                    $140K

                          12/3/X2       15 shares Apple                                     $275K

                          3/8/X3         25 shares Apple                                     $300K

                                               

a.        On June 6, 20X3, Michonne calls her broker and tells him to sell 50 share of Apple stock, which the broker sells for $750K.  What is Michonne’s recognized gain or loss, if any, on the 6/6/X3 sale of Apple stock?

b.        What would your answer be if on June 6, 20X3, Michonne calls her broker and tells him to sell 50 share of Apple stock purchased on 1/3/X1, 12/31/X1, 4/3/X2 and 12/3/X2, which the broker sells for $750K? What is Michonne’s recognized gain or loss, if any, on the 6/6/X3 sale of Apple stock?

                                    

c.         On February 1, 20X1, Michonne sales 10 shares of Berkshire Hathaway for $150K.   What would Michonne’s recognized gain/loss, if any, be on the sale?

  

Answer 1

Date	Stock name	no of shares	Purchase value
1/3/X1	Apple	10	175000
12/31/X1	Apple	15	225000
3/8/x2	Apple	25	275000
4/3/x2	Apple	10	175000
12/3/x2	Apple	15	275000
3/8/x3	Apple	25	300000
	Total	100	1425000
1/3/X1	Beckshire hathway	10	160000
2/3/X1	Beckshire hathway	10	175000
	Total	20	335000
6/28/X1	Kmart	75	100000
6/2/x2	Kmart	75	140000
	Total	150	240000
a. Sale of 50 shares on 6th June X3 will include first 3 purchases as it sums to 50 shares
Total purchase cost		=	175000+225000+275000
		=	675,000
Sale price		=	750,000
Recognised gain		=	75,000
b.
Date	Stock name	No of shares	Purchase value
1/3/X1	Apple	10	175000
12/31/X1	Apple	15	225000
4/3/x2	Apple	10	175000
12/3/x2	Apple	15	275000
	Total cost	50	850,000
Sale price		=	750,000
Recognised loss		=	100,000
c. For sale on 1 feb x1 we will consider purchase of stock on 3rd Jan x1
Total purchase cost		=	160000
Sale price		=	150000
Recognised loss		=	10000