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4.            John buys shares of stock in Acme Corp. on January 1, 2018 for $50. John...

4.            John buys shares of stock in Acme Corp. on January 1, 2018 for $50. John dies July 1, 2018 when the stock has a fmv of $60. Mary inherits the stock from John’s estate.          Mary sells the stock on September 1, 2018 for $80.

               a.            What is the gain /loss recognized by John’s estate?      ______________  

                              What is the character of the gain/loss? _____________

               b.            What is the gain /loss recognized by Mary?      ______________  

                              What is the character of the gain/loss? _____________

5.            Same facts as in Question 4 except the value of the shares is $40 on John’s date of death.

               a.            What is the gain /loss recognized by John’s estate?      ______________  

                              What is the character of the gain/loss? _____________

               b.            What is the gain /loss recognized by Mary?      ______________  

                              What is the character of the gain/loss? _____________

6.            Same facts as in Question 4 except Mary sells the stock for $30.

               a.            What is the gain /loss recognized by John’s estate?      ______________  

                              What is the character of the gain/loss? _____________

               b.            What is gain /loss recognized by Mary?      ______________  

                              What is the character of the gain/loss? _____________

7.            Same facts as in Question 4 except Mary Sells the stock on May 1, 2019.

               a.            What is the gain /loss recognized by John’s estate?      ______________  

                              What is the character of the gain/loss? _____________

               b.            What is the gain /loss recognized by Mary?      ______________  

                              What is the character of the gain/loss? _____________

Solutions

Expert Solution

4 (A) What is the gain /loss recognized by John’s estate? Loss for $60
What is the character of the gain/loss? Short Term capital loss
(B) What is the gain /loss recognized by Mary? Profit of $20 ($80-$60)
What is the character of the gain/loss? Short Term Capital gain
5 (A) What is the gain /loss recognized by John’s estate? Capital Loss of $40
What is the character of the gain/loss? Short term capital loss
(B) What is the gain /loss recognized by Mary? Capital Gain of $40 ($80-$40)
What is the character of the gain/loss? Short Term Capital gain
6 (A) What is the gain /loss recognized by John’s estate? Capital Loss for $60
What is the character of the gain/loss? Short Term capital loss
(B) What is the gain /loss recognized by Mary? Capital Loss of $30 ($30-$60)
What is the character of the gain/loss? Short term Capital Loss
7 (A)   What is the gain /loss recognized by John’s estate? Capital Loss for $60
What is the character of the gain/loss? Short Term capital loss
(B) What is the gain /loss recognized by Mary? Capital Gain of $20 ($80-$60)
What is the character of the gain/loss?   Long Term Capital gain
Note: (A) When you inherit stock from someone then the value of that stock on the date that person died shall be considered : FMV SHALL BE TAKEN
(B) In case of shares gain/losses are recognised as capital gains/losses because these are capital asset . In 7th Point Gain is considered as Long Term Capital Gain because
shares are sold after 1year and for shares more than 1 year is taken as long term.

ekkarill92 answered 1 year ago
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