Chapter 16, Problem 2CPA

Conner purchased 300 shares of Zinco stock for $30,000 in year 1. On May 23, year 6, Conner sold all the stock to his daughter Alice for $20,000, its then fair market value. Conner realized no other gain or loss during year 6. On July 26, year 6, Alice sold the 300 shares of Zinco for $25,000. What was Alice’s recognized gain or loss on her sale?

1. a. $0
2. b. $5,000 long-term gain
3. c. $5,000 short-term loss
4. d. $5,000 long-term loss