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16 September, 16:51

Helmut purchases 100 shares of stock in Caisson Corporation for $1,000 in Year 1. On December 1 of Year 2, he purchases an additional 100 shares in the company for $1,500. On December 28 of Year 2, Helmut sells the 100 shares acquired in Year 1 for $1,200. What is Helmut's recognized gain or loss from the December 28 sale, and what is his resulting basis in the stock purchased on December 1 of Year 2?

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  1. 16 September, 19:26
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    The correct answer is $200 gain; $1500.

    Explanation:

    In year 1, Helmut buys 100 shares at $1000. He sells the 100 shares bought in year 1 on December 28 year 2 at $1200. So:

    Profit = (Sale price-Purchase price)

    Profit = $1200 - $1000

    Profit = $200

    For the purchase and sale of the initial 100 shares, Helmut earned $200 of profit.

    Cost basis is the original amount in an investment for a determined asset adjusted due to stock splits. In Helmut's case, for the 100 shares purchased on December 28, his investment is $1500.
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