Question

Holly has worked for Ford Motor Company for several years. Each year, she purchases 50-100 shares of the company's stock for her investment portfolio. During the current year, Holly sold 25% of her stock to purchase a new home. She hasn't maintained records to track the basis of the shares as she purchases them for her stock portfolio. What method should she use to calculate her tax basis?

A) Weighted average cost method

B) Last-in, first-out method

C) First-in, first-out method

D) Specific identification method

Answer 1

Holly should use the Specific Identification method to calculate her tax basis for the shares she sold.

Step-by-step explanation:

To calculate her tax basis for the shares she sold, Holly should use the Specific Identification method. This method allows her to choose which specific shares she is selling and use the purchase price of those shares to calculate her tax basis. Since Holly hasn't maintained records to track the basis of the shares, she will need to identify which shares she sold and determine the purchase price for those specific shares.