Question

13. On February 12, 2019 he received 2,000 shares of BRX, a Canadian public corporation from his late mother’s estate. His mother purchased these shares at a weighted average cost of $3.75 a share. The fair market value of these shares on the date of transfer was $5.50 per share. Allen purchased another 100 shares on March 5, 2019 at $4.85 a share. On April 1st the company paid out a stock dividend of 10%, which resulted in an increase in the paid up capital of $4.00 for each share issued. He sold 1,200 shares on July 15, 2019 at $4.00 a share. On August 10, 2019 he purchased 250 shares at a price of $4.25 a share. At the end of the year he still owns these shares. Calculate capital gains from identical properties? This question takes place in Canada.

Answer 1

If the client receives anything as a gift, they are generally considered to be received at fair market value on the date received.

Capital gains -

Stock as on July 15, 2019 - 2310 SHS @5.34 (adjusted cost basis) = $12,335.40

Capital Gains  -

Proceeds - 1200 SHS @4.00 = $4,800

Basis 1200 SHS $5.34 = $6,408

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Capital gain/loss ($1,608) Capital losses can be used to offset capital gains and reduce the overall tax you will pay. You can carry capital losses back 3 years or forward into future years.   

Date	Transaction	Cost	No. of units	Cost
Feb 12, 21019	BRX Shares	11000	2000	5.5	FMV
Mar 5, 2019	Purchase - 100 SHS @4.85	485	100	4.85
		11485	2100
April 1, 2019	Dividend - Reinvested-10%	840	210	4.00
	New Cost	12325	2310	5.34
July 15, 2019	Sales - 1200 SHS @4.00	4800	1200
	New Cost	7525	1110	6.78
Aug 10, 2019	Purchase - 250 SHS @4.25	1062.5	250
	New Cost	8587.50	1360	6.31