Dahlia is in the 32 percent tax rate bracket and has purchased the following shares of Microsoft common stock (Nasdaq: MSFT) over the years: Date Purchased Shares Basis 7/10/2013 400 $ 12,000 4/20/2014 300 10,750 1/29/2015 500 12,230 11/02/2017 250 7,300 If Dahlia sells 800 shares of Microsoft for $40,000 on December 20, 2023, what is her capital gain or loss in each of the following assumptions? She uses the specific identification method and she wants to minimize her current-year capital gain.

To minimize her current-year capital gain, Dahlia would want to sell the shares with the highest cost basis first, as this would result in the smallest gain (or the largest loss). Using the specific identification method, she can choose which shares to sell. Let's calculate the capital gain or loss for each assumption: Assumption 1: Dahlia sells the 400 shares purchased on 7/10/2013 and 400 shares purchased on 4/20/2014. - For the 400 shares purchased on 7/10/2013: Sale proceeds: 400 shares * (40,000/800 shares) = $20,000 Cost basis: $12,000 Capital gain: $20,000 - $12,000 = $8,000 - For the 400 shares purchased on 4/20/2014: Sale proceeds: 400 shares * (40,000/800 shares) = $20,000 Cost basis: 400 shares * ($10,750/300 shares) = $14,333.33 Capital gain: $20,000 - $14,333.33 = $5,666.67 Total capital gain: $8,000 + $5,666.67 = $13,666.67 Assumption 2: Dahlia sells the 500 shares purchased on 1/29/2015 and 300 shares purchased on

Get Started

Get your tax questions answered