Mort owns 500 shares of Pear, Inc. stock with an adjusted basis of $22,000. On July...

Mort owns 500 shares of Pear, Inc. stock with an adjusted basis of $22,000. On July 28, 2020, he sells 100 shares for $3,000. On August 16, 2020, he purchases another 100 shares for $3,400. Select the best answer below based on the fact pattern

	A.	Mort has a tax loss of $1,400 and his basis on shares purchased on August 16 is $3,000
	B.	Mort's adjusted basis for the 100 shares purchased on August 16 is $4,800 and he has a tax loss of $1,400 related to the sale.
	C.	Mort's adjusted basis for the 100 shares purchased on August 16 is $3,400 and he has a tax loss of $1,400 related to the sale.
	D.	Mort's adjusted basis for the 100 shares purchased on August 16 is $4,800 and he is not able to recognize any loss for tax purposes
	E.	Mort's adjusted basis for the 100 shares purchased on August 16 is $4,800 and he has a tax gain of $1,400 related to the sale.

Expert Solution

A.	Mort has a tax loss of $1,400 and his basis on shares purchased on August 16 is $3,000
B.	Mort's adjusted basis for the 100 shares purchased on August 16 is $4,800 and he has a tax loss of $1,400 related to the sale.
C.	Mort's adjusted basis for the 100 shares purchased on August 16 is $3,400 and he has a tax loss of $1,400 related to the sale.
D.	Mort's adjusted basis for the 100 shares purchased on August 16 is $4,800 and he is not able to recognize any loss for tax purposes
E.	Mort's adjusted basis for the 100 shares purchased on August 16 is $4,800 and he has a tax gain of $1,400 related to the sale.

Option d is correct
The transaction is a wash sale as the purchase of the 100 shares of Pear stock on August 16 is within 30 days of the sale of the 100 shares of Pear.
Adjusted basis on July 28 = 22000/500 x 100 shares	4400
Amount realized =	3000
Mort’s realized loss	1400
Mort’s realized loss of $1,400 is not recognized.
Purchased price of 100 shares on Aug 16	3400
disallowed loss on the wash sale	1400
Adjusted basis on July 28 = 22000/500 x 100 shares	4800

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