tax 242426

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CH PROBLEMS N REUTERS Note: Solutions to Research Problems can be prepared by using the Checkpoint® Student Edition online research product, which is available to accompany this text. It is :CKPOINT® also possible to prepare solutions to the Research Problems by using tax research mate­ rials found in a standard tax library. Research Problem 1. Ali owns 100 shares of Brown Corporation stock. He purchased the stock at five different times and at five different prices per share as indicated: Share Block Number of Shares Per Share Price Purchase Date A 10 $60 10/10/95 B 20 20 8111/96 c 15 15 10/24/96 D 35 30 4/23/98 E 20 25 7/28/98 On April 28, 2012, Ali will sell 40 shares of Brown stock for $40 per share. All of Ali’s shares are held by his stockbroker. The broker’s records track when the shares were pur­ chased. May Ali designate the shares he sells? If so, which shares should he sell? Assume that Ali wants to maximize his gain because he has a capital loss carryforward. Research Problem 2. Clean Corporation runs a chain of dry cleaners. Borax is used heavily ‘lications in Clean’s dry cleaning process and has been in short supply several times in the past. Clean Corporation buys a controlling interest in Dig Corporation-a borax mining con­ cern. Clean’s sole reason for purchasing the Dig stock is to ensure Clean of a continuous supply of borax if another shortage develops. Although borax must be refined before it is usable for dry cleaning purposes, a well-established commodities market exists for unrefined borax for refined borax. Mter owning the Dig stock for several years, Clean sells the stock at a loss because Dig is in financial straits. Clean no longer needs to . Dig because Clean has obtained an alternative source of borax. What is the nature Clean’s loss on the disposition of the Dig Corporation stock? Write a letter to the , ler, Salvio Guitterez, that contains your advice and prepare a memo for the tax files. ~ mailing…


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