Robert sold his lebec corporation stock to his sister karen for $8,000. robert's cost basis in the stock was $15,000. karen later sold this stock to dana, an unrelated party, for $15,500. what is karen's realized gain?

$7,500

Explanation:

A few points must be considered in order to calculate ther realized gain.

1. Although Robert's stock in Lebec Corporation was $15,000 at cost, it was sold to Karen (his sister and related party) for $8000. Since it is related party transaction, the loss of $7000 ($15,000-$8,000) cannot be reported as a loss.

2. Karen's basis for the stock is $8000 (the amount she bought it from her brother).

3. Karen sold the stock to Dana for $15,500. The realized gain since Dana is not related is $15,500-$8,000= $7,500. This becomes the realized gain since it is an unrelated party transaction.

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