Question

For 2018. Christina, who is single, purchased 220 shares of Apple Inc. stock several years ago for $12,320. During her year-end tax planning, she decided to sell 110 shares of Apple for $5,610 on December 30. However, two weeks later, Apple introduced its latest iPhone, and she decided that she should buy the 110 shares (cost of $5,830) of Apple back before prices skyrocket.

(1)

(a) What is Christina's deductible loss on the sale of 110 shares?

(b) What is her basis in the 110 new shares?

(2) Assume the same facts, except that Christina repurchased only 55 shares for $2,915.

(a) What is Christina’s deductible loss on the sale of 110 shares?

(b) What is her basis in the 55 new shares?

Answer 1

(1)

(a) What is Christina's deductible loss on the sale of 110 shares?

Christina has engaged in a wash sale because she bought identical stock within 30 days of selling Apple stock. Therefore, her $550 ($5610 less $6160*) loss is disallowed

220 shares = $12320

Each share = $12320/220 = $56 per share

Out of 220 shares she sold out 110 shares then remaining will 110 shares.

So cost of 110 shares= 110 x $56= $6160

(b) What is her basis in the 110 new shares?

The basis of Christina’s 110 shares of new Apple stock is $6380 ($5830 purchase price plus $550 of disallowed loss).

(2)

Assume the same facts, except that Christina repurchased only 55 shares for $2,915.

(a) What is Christina’s deductible loss on the sale of 110 shares?

Christina has engaged in a partial wash sale because she bought 55 shares of identical stock within 30 days of selling Apple stock. Therefore, she may deduct 50% of her 550 ($6160 less $5610) loss; the remaining $275 is disallowed.

(b) What is her basis in the 55 new shares?

The basis of Christina’s 55 shares of new stock is $3190 ($2915 purchase price plus $275 of disallowed loss)