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, and Series 66):
Your father bought 200 shares of stock in Acme Holdings in 1982 at $20 per share. On the day he died and left the shares to you, the stock was worth $45 per share. You sold all of the shares one month later for $48 per share. What is your tax burden on this sale?
Answers:
A. You pay long-term capital gains tax on $5600.
B. You pay long-term capital gains tax on $5000 and short-term capital gains on $600.
C. You pay long-term capital gains tax on $600.
D. You pay short-term capital gains tax on $5600.
Correct Answer: C. You pay long-term capital gains tax on $600.
Rationale: Your basis in these shares is their value on the day your father died (200 X $45 = $9000). Your proceeds from the sale are $9600. Your capital gain is $600, and the IRS treats this as a long-term capital gain.
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