This week’s study question from the Solomon Online Exam Simulator question database is now available.
Question (Relevant to the Series 6, Series 7, Series 62, Series 65, Series 66, and Series 82):
Ten years ago, Janice bought 100 shares of Humdrum Inc. at $70 per share. The price of the stock has declined and this year she decides to sell the stock at $25. A week after she sells the stock, Humdrum announces an exciting new product called Humdinger and Janice decides Humdrum is a stock she wants to own after all and she buys 100 new shares of Humdrum at $30. Which of the following is true?
Answers:
A. Janice can claim a $45 per share loss on her tax return
B. Janice can claim a $40 per share loss on her tax return
C. The basis of the new shares will be $75
D. The basis of the new shares will be $55
Correct Answer: C
Rationale: According to IRS rules, if you sell a security at a loss and then buy back the same securities within 30 days, any loss on the sale of the original securities is disallowed. This is called a Wash Sale. However, you are permitted to capture the loss by adding it to the basis of the new shares. Therefore, the basis of the new shares will be $30 (purchase price) + $45 (per share loss on sale of old shares) = $75.
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