Question

Serena and Venus are sisters. Venus sold stock to Serena for $5,000, its fair market value. The stock cost Venus $10,000 five years ago. Also, Venus sold Carol (an unrelated party) stock for $2,000 that cost $10,000 three years ago. What is Venus' recognized loss before the $3,000 capital loss limitation?

Answer 1

Based on the information given the Venus' recognized loss before the $3,000 capital loss limitation is $8,000.

Using this formula

Recognized loss=Stock cost-Selling price

Where:

Stock cost=$10,000

Selling price=$2,000

Let plug in the formula

Recognized cost=$10,000-$2,000

Recognized cost=$8,000

Inconclusion the Venus' recognized loss before the $3,000 capital loss limitation is $8,000.

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