John Broward owns 1,500 shares of Silver Fox Corporation common stock. John purchased the 1,500 shares on April 17, 2011, for $21,000. On December 8, 2018, John sells 750 shares for $5,000. On January 2, 2019, John buys 250 shares of Silver Fox Corporation common stock for $1,750 and 50 shares of Silver Fox Corporation preferred stock for $1,000. The preferred stock is nonvoting, nonconvertible.What is John’s realized and recognized loss on the December 8 sale of stock?What is his basis and the holding periods of the shares purchased in 2011 and in 2018?I believe I have the correct answers for question 1 but I'm not sure if I understand determining the basis for question 2. I'm not sure I understand the explanation and the example in my textbook, so, a detailed, yet simplified explanation would be very helpful.

Wash Sale Rule: If you sell a a stock for a loss and buy back within 30 days after the loss-sale…

Answered: What is John’s realized and recognized…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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John Broward owns 1,500 shares of Silver Fox Corporation common stock. John purchased the 1,500 shares on April 17, 2011, for $21,000. On December 8, 2018, John sells 750 shares for $5,000. On January 2, 2019, John buys 250 shares of Silver Fox Corporation common stock for $1,750 and 50 shares of Silver Fox Corporation preferred stock for $1,000. The preferred stock is nonvoting, nonconvertible.

What is John’s realized and recognized loss on the December 8 sale of stock?
What is his basis and the holding periods of the shares purchased in 2011 and in 2018?

I believe I have the correct answers for question 1 but I'm not sure if I understand determining the basis for question 2. I'm not sure I understand the explanation and the example in my textbook, so, a detailed, yet simplified explanation would be very helpful.

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