Three years ago, Adrian purchased 505 shares of stock in X Corporation for $67,165. On December 30 of year 4, Adrian sells the 505 shares for $59,590. b. Assuming Adrian has no other capital gains or losses, except that on January 20 of year 5, Adrian purchases 505 shares of X Corporation stock for $59,590. How much loss from the sale on December 30 of year 4 is deductible on Adrian's year 4 tax return? What basis does Adrian take in the stock purchased on January 20 of year 5?

b. The situation described in part b involves the "wash sale" rule. According to the IRS, a wash sale occurs when an individual sells or trades stock or securities at a loss and within 30 days before or after the sale: 1. Buys substantially identical stock or securities, 2. Acquires substantially identical stock or securities in a fully taxable trade, 3. Acquires a contract or option to buy substantially identical stock or securities, or 4. Acquires substantially identical stock for their individual retirement account (IRA) or Roth IRA. Since Adrian repurchased the same number of shares of X Corporation stock within 30 days after the sale, the loss from the sale on December 30 of year 4 is disallowed for the year 4 tax return due to the wash sale rule. The disallowed loss is added to the basis of the newly purchased stock. This means that Adrian's basis in the stock purchased on January 20 of year 5 would be the purchase price plus the disallowed loss from the sale on December 30 of year 4. Here's how it works: 1. Calculate the disallowed loss from the sale on December 30 of year 4: Purchase price of the stock: $67,165 Sale price of the stock: $59,590 Loss: $67,165 - $59,590 = $7,575 Since the repurchase on January 20 of year 5 is within the

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