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?
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.
