- 5 -
From this we distill the following. First, prior to March
8, 1996, petitioner owned 100 shares of IBM stock, as evidenced
by the fact that he received the March 11, 1996, dividend.
Second, during 1996, petitioner purchased and sold 200 shares of
IBM stock. He, therefore, still owned the same number of shares
that he owned prior to March 11, 1996. Third, during January
1997, petitioner purchased 100 shares and sold 100 shares of
presplit stock.
During 1997, petitioner purchased 900 shares and sold 800
shares as follows:
Transaction Balance of Shares
1997 Opening Balance IBM Shares 100
Sell 1/23 100 15,374 -0-
Buy 1/28 100 15,287 100
Sell 5/16 100 15,424 -0-
May 27, 1997 - 2:1 Stock Split
Sell 9/19 600 59,923 (600)
Buy 9/26 200 20,500 (400)
Buy 10/28 400 38,975 -0-
Buy 10/29 200 20,237 200
The cost of shares is petitioner’s basis for determining a
gain or loss on the transaction. See secs. 1011, 1012, 1016. In
attempting to identify which shares were sold, and in the absence
of other identification, we use the first-in first-out method of
accounting. Kluger Associates, Inc. v. Commissioner, 617 F.2d
323, 326-327 (2d Cir. 1980), affg. 69 T.C. 925 (1978); sec.
1.1012-1(c)(1), Income Tax Regs. With regard to the sale on
January 23, 1997, this stock was purchased on March 11, 1996, for
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