Question

Determine the realized and recognized gain or loss and the character of the gain or loss.

1. Emilio and Charita own stock in Software Corporation.

They purchased 1,000 shares for $20 per share in July 2006. They paid $400 in brokerage commissions.

On July 21, 2013, Software Corporation distributed a 2-for-1 stock split.

The fair market value at the time of the split was $100 per share.

2. On July 21, 2008, Emelio's father gave him 100 shares of stock in Flex Corporation.

His father paid $35 per share in June 1999. The fair market value at the date of the gift was $45 per share.

3. Emelio raises the additional cash he needs to complete the building repairs by selling 100 shares of Software Corporation stock for $24 per share. (He pays brokerage commissions of $140.)

He also sells 100 shares of Flex Corporation stock for $40 per share. (Brokerage commissions are $200.)

Answer 1

1)	$
Basic cost of share	20,000
Brokerage commission paid to purchase	400
Total Cost of share	20,400	(a)
Fair Value at the date of slipt
(2000*100)	2,00,000	(b)
Recognised Gain on Split date	1,79,600	(b-a)
2)
Fair Value at gift date	4,500
(100*45)
Cost for her father hand	3,500
(100*35)
Recognised Gain on Gift date	1,000
3)
Sale of Software corp.	2400
(100*24)
Less: Brokerage	-140	2260
Sale of Flex Corp.	4000
(100*40)
Less: Brokerage	-200	3800
Net Sale Proceeds		6060
Less: Cost of Shares
Software corp. (20400/1000*100)	2040
Flex Corp. (100*35)	3500	5540
Realized Gain		520
and Taxable