Question 1: What is the gain or loss on the sale of the Coca Cola shares?

Question

Basis per share:

Original basis- 500 shares

Number of splits- The 500 shares split multiple times, resulting in 24,000 shares.

Implied basis per share- $450,000 (total basis) / 24,000 (total shares) = $18.75 per share

Proceeds from the sale:

Sales price per share- $65 (assumed closing price)

Number of shares sold- 8,000

Gross proceeds- 8,000 shares * $65/share = $520,000

Broker fee- 2% of gross proceeds = $10,400

Net proceeds- $520,000 - $10,400 = $509,600

Gain or loss:

Basis of shares sold- 8,000 shares * $18.75/share = $142,000

Gain- $509,600 (Net proceeds) - $142,000 (Basis) = $367,600 long-term capital gain

Answer 1

Your breakdown is excellent and logically structured! Here's a cleaned-up and clearly formatted version you can use in a report, presentation, or for explaining the transaction to a client:

Capital Gain Calculation

Basis Per Share

1. Original Holding: 500 shares
2. Share Splits: Increased total to 24,000 shares
3. Total Original Basis: $450,000
4. Implied Basis Per Share:
5. 450,00024,000=$18.75 per share\frac{450,000}{24,000} = \mathbf{\$18.75 \text{ per share}}

Proceeds from Sale

1. Shares Sold: 8,000
2. Sale Price Per Share: $65
3. Gross Proceeds:
4. 8,000×65=$520,0008,000 \times 65 = \mathbf{\$520,000}
5. Broker Fee (2%):
6. 520,000×0.02=$10,400520,000 \times 0.02 = \mathbf{\$10,400}
7. Net Proceeds:
8. 520,000−10,400=$509,600520,000 - 10,400 = \mathbf{\$509,600}

Capital Gain Calculation

1. Cost Basis of Shares Sold:
2. 8,000×18.75=$150,0008,000 \times 18.75 = \mathbf{\$150,000}
3. Long-Term Capital Gain:
4. 509,600−150,000=$359,600509,600 - 150,000 = \mathbf{\$359,600}

Note: You originally listed the cost basis of 8,000 shares as $142,000, but based on your own calculation of $18.75 per share, it should be:

8,000×18.75=150,0008,000 \times 18.75 = \boxed{150,000}This adjustment leads to a slightly lower long-term capital gain of $359,600, not $367,600.

Answer 2

I got $359,600 for the long-term capital gain. See the steps I took below:

Step 1: Implied Basis Per Share

1. Total basis = $450,000
2. Total shares = 24,000
3. Implied basis per share = $450,000 / 24,000 = $18.75

Step 2: Gross & Net Proceeds

1. Sales price per share = $65
2. Shares sold = 8,000
3. Gross proceeds = 8,000 × $65 = $520,000
4. Broker fee = 2% × $520,000 = $10,400
5. Net proceeds = $520,000 − $10,400 = $509,600

Step 3: Basis of Shares Sold

1. Basis = 8,000 × $18.75 = $150,000 (I believe this is where our steps differed)

Step 4: Gain Calculation

1. Net proceeds = $509,600
2. Basis = $150,000
3. Gain = $509,600 − $150,000 = $359,600

Hope this was helpful.