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Harry bought 1 share of ABC Corp. for $500/share on January 1, 2015; Harry paid $10...

Harry bought 1 share of ABC Corp. for $500/share on January 1, 2015; Harry paid $10 in
acquisition costs to acquire the stock. On January 1, 2016, Harry bought 1 share of ABC
Corp. for $1000/share; Harry paid $20 in acquisition costs to acquire the stock. On
January 1, 2017, Harry bought 1 share of ABC Corp. for $1500/share; Harry paid $30 in
acquisition costs to acquire the stock.
On January 1, 2019, Harry sold 1 share of ABC Corp. for $1000/share. Harry paid $25 in
selling expenses.

Harry does not use the default method. What is Harry’s realized gain or loss on the sale of the 1 share of ABC Corp. if Harry uses the specific identification method to maximize his tax losses in 2019?

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Answer #1

Specific identification inventory valuation is used to track specific items through the inventory-to-sales channel, including the specific costs associated with that item of inventory.

Details of shares bought

Date share value acquisition cost Total value
1.1.15 $500 $10 $510
1.1.16 $1,000 $20 $1,020
1.1.17 $1,500 $30 $1,530

Share sold on 1.1.19

Rate- $1000

Selling expense-$ 25

Total sale value - $ 1,025

Value of share to be taken on share sold under specific identification method = $1,020 (value easy to identify)

Therefore profit on sale = $1,025 - $1,020

= $5

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