# re: 2016 AICPA Released Difficult Qs – no 11- Wash Sale

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Mike030882
Participant

I apologize if this has been posted here already.

The following question has been giving me fits all day:

On year 1, Janice had the following transactions in Jacky, Inc. common stock:

Jan 1 – Purchase of 500 shares for \$25

May 12 – Sale of 500 shares for \$23

May 28 – Purchase of 250 shares for \$22

Oct 15 – Sale of 100 shares for \$18

What is Janice's deductible capital loss?

(a) \$400

(b) \$700

(c) \$1,100

(d) \$1,400

The correct answer is (c) \$1,100.

I would greatly appreciate if someone could explain the answer prior to May 10, my REG exam date.

Thanks.

AUD - 90
BEC - 79
FAR - 77
REG - 77
They don't trust JUST ANYBODY to count beans
Biff-1955-Tannen
Participant

That's a good question, I keep getting \$1,200 assuming FIFO and \$900 assuming LIFO

AUD - 93
BEC - 83
FAR - 83
REG - 84
Nobody calls me chicken
Anonymous
Inactive

the 500 sold have a disallowed loss of (\$500) because they were then repurchased within 30 days before or after the sale on the 12th at a loss.

new basis = Purchase price of new + loss disallowed

ABTX411
Participant

The loss on 5/12 is \$1,000. On 5/28, you purchase 1/2 of the securities you sold on 5/12, so you have a wash sale, and you have to defer \$500 (one half) of the loss by adding the \$500 to the basis of the shares purchased on 5/28: \$500 deferal / 250 shares = \$2/share + \$22/share paid = \$24/share basis. When you sell in October, your loss is 100 (18-24) = 600. Add this to the \$500 loss that was allowed on 5/12, and you get \$1,100 for the year.

Biff-1955-Tannen
Participant

@ABTX411 nice. I didn't know you defer the loss into the next purchase basis. Thanks

AUD - 93
BEC - 83
FAR - 83
REG - 84
Nobody calls me chicken
Yolonge
Participant

Was not sure for the second part, I wanted to put something but only figured out \$500 deductible portion.

This will be helpful for my 99.9% reg retake!

FAR - 83 (1/7/16)
BEC - 87 (4/18/16)
AUD - 92 (7/2/16)
REG - 83 (12/5/16)
Ethics - 100%!

Licensed CPA in state of Maryland Feb 2017

Anonymous
Inactive

250 share bought for \$22/ share = \$5500
+loss disallowed =\$500
so basis of 250 shares =6000
rate per share =6000/250=\$24

now 100 shares sold at \$18/share =1800
less basis 100*24 =2400
loss =600
so total allowed capital loss =500+600=1100

Mike030882
Participant

Thanks guys!!

I knew you had to defer the loss, since a “replacement” batch was either purchased or sold within 30 days of the sale. But, it didn't occur to me to keep a rate per share tally going–6000 new basis / 250 new total shares of stock. I was just trying to factor the relationship between the 250 repurchased and the 100 later sold in October.

This explanation reminds me of how you have to update the basis per stock when you get a stock split. Maybe I'm getting ahead of myself.

Anyway, I'm so pleased to have this problem explained. Good luck all.

AUD - 90
BEC - 79
FAR - 77
REG - 77
They don't trust JUST ANYBODY to count beans
se7en.14
Participant

is it a rule that you have to defer 50% of the loss from wash sale? thanks.

.
monikernc
Participant

No. The rule is you have to prorate the loss based on the number of shares repurchased within 30 days of a sale of the same type securities. In this case the 50% is based on 250 repurchased/500 sold. Follow Anonymous’ example above.

AUD - 93
BEC - 82
FAR - 76
REG - 88
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Reply To: re: 2016 AICPA Released Difficult Qs – no 11- Wash Sale

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