On November 15, 2019, Tim, a cash basis taxpayer, gave his Daughter Nancy 1000 shares of JP Morgan common stock, which Tim purchased on June 30, 2015 for $60,000. On the date of the gift the stock was selling on the NY Stock Exchange for $46 per share. On December 03, 2019, the corporation declared a 1 for 1 stock dividend payable on December 10, 2019, to shareholders of record as of November 22, 2019. On January 17, 2020, Nancy sold 1,500 shares of JP Morgan common stock that she received from her father and from the stock dividend for $18 per share. a) What is Nancy’s recognized gain or loss on the sale of the 1,500 shares on January 17, 2020? b) What is Nancy’s total basis in the remaining shares? Explain your answer and show all calculation.

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Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.