Your client is contemplating the sale of some of her holdings in her employer's stock.

The stock was acquired in four separate purchases as follows:

7/1/1986 = 200 Shares @ $10 per share (Cost: $2,000)

6/1/1988 = 200 Shares @$18 per share (Cost: $3,600)
6/1/1990 = 200 shares @ $12 per share (Cost: $2,400)
6/1/1992 = 200 Shares @ $20 per share (Cost:$4,000)
Total 800 Shares $12,000

She wants to know the least amount of gain she would be required to report if she sold
500 shares for $12,500. Compute this gain.

A. $500
B. $3,700
C. $4,300
D. $5,000
E. $5,700
Answer: B

The client can use specific identification as a method to determine the basis of stock for
purposes of calculating gains or losses. This method will generally produce the least
amount of gain, because the highest basis shares can be sold first.

Sale price (500 shares) $12,500

Sell 200 shares @ $20/share $4,000

Sell 200 shares @ $18/share $3,600
Sell 100 shares @ $12/share $1,200 $8,800
$3,700
Which of the following dispositions of IRC Section 1245 recapture property would result
in the immediate recapture of some or all of previous depreciation deductions?

A. A distribution by a partnership to its partners.

B. A like-kind exchange.
C. A disposition at death.
D. A sale for cash and an interest-bearing note.
Answer: D

A represents a transaction that entails a carry over basis. B represents a transaction

that entails a carry over basis, unless boot is received. C represents the adjustment in
basis to FMV at death. D represents a sale for cash that causes recapture of gains to
the extent of gain in excess of basis. Any gain over the original purchase price would be
a Section 1231 gain.

Note: A sale at adjusted taxable basis would not cause recapture. However, D is the
best answer presuming the sale is for an amount in excess of adjusted taxable basis.