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27 July, 12:20

Brittany sold her stock (the basis of $60,000) to her brother, Ridge, for $35,000, the fair market value. Her brother subsequently sells the stock to the third party for $34,000. What is Ridge's recognized gain or (loss) ?

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  1. 27 July, 14:35
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    Brittany sold her stock (the basis of $60,000) to her brother, Ridge, for $35,000, the fair market value. Her brother subsequently sells the stock to the third party for $34,000.

    Ridge's recognized gain or (loss) is ($ 1,000).

    Explanation:

    The formula for calculating recognized Gain/[loss] is expressed below:

    Recognized Gain/[loss] = Sales Price - Fair Market Value at the time of purchase from Brittany

    Recognized Gain/[loss] = $ 34,000 - $ 35,000 = [$ 1,000]

    Based on the calculation above, Ridge's recognized gain or (loss) is ($ 1,000).
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