- Jorge owns 800 shares of Archer Company stock. He had purchased 300 of the shares for $9,000 and 500 of the shares for $10,000. During the current year, Jorge instructs his broker to sell 400 of the shares when their market value hits $29. He pays a $300 commission on the sale.
- Alana owns 300 shares of Courtney Common Stock that had cost her $6,000. On February 1, she sells the 300 shares for $4,800 and pays a $300 commission on the sale. On February 19, Alana purchases 500 shares of Courtney common stock for $5,300 plus a $400 commission.
Jorge has a realized and recognized gain on the sale of $300:
Amount realized [(400 shares x $29) – $300] $ 11,300
Basis of shares sold (FIFO):
300 shares from 1st purchase $ 9,000
100 shares from 2nd purchase (100 x $20) 2,000 (11,000)
Realized and recognized gain $ 300
2
Alana has realized a loss of $1,500 [($4,800 – $300) – $6,000] on the sale of the 300 shares of stock. However, none of the loss is recognized because Alana replaced the shares of stock within 30 days of the sale at a loss. Under the wash sale rules, the $1,500 of realized loss is added to the basis of the replacement shares, thus deferring recognition of the loss until the replacement shares are sold. Alana’s basis in the 500 shares purchased on February is determined as follows:
Total cost = $5,300 + $400 = $ 5,700
Cost per share = $5,700 ÷ 500 = $11.40
Basis of 500 shares
300 wash sale shares = (300 x $11.40) + $1,500 $ 4,920
200 shares = (200 x $11.40) 2,280
Total Basis $ 7,200
