Question

In an Initial Public Offering on May 1, 2009, Timmy Hilfigure purchased 1,000 shares of Abner Crummie, Inc. for $5,000. On April 30, 2015, Timmy Hilfigure sold the 1,000 shares for $8,000 to Ralph Loring. What is the effect of the sale on April 30, 2015?

Answer 1

Timmy Hilfigure made a capital gain of $3,000 by selling 1,000 shares he bought for $5,000 for $8,000, which is the effect of the sale.

Step-by-step explanation:

The question relates to the calculation of capital gain from the sale of stocks. Timmy Hilfigure purchased 1,000 shares of a company for $5,000 and sold them for $8,000. The effect of the sale on April 30, 2015, for Timmy Hilfigure involves realizing a capital gain on the investment. To calculate the gain, we subtract the original purchase price from the selling price:

• Selling price: $8,000
• Purchase price: $5,000
• Capital gain: $8,000 - $5,000 = $3,000

This $3,000 represents the profit Timmy made from the investment, excluding any possible transaction fees, taxes, or other costs associated with the sale.