In late December you decide, for tax purposes, to sell a losing position that you hold in Twitter, which is listed on the NYSE, so that you can capture the loss and use it to offset some capital gains, thus reducing your taxes for the current year. However, since you still believe that Twitter is a good long-term investment, you wish to buy back your position in February the following year. To get this done you call your Charles Schwab brokerage account manager and request that he immediately sell your1,200 shares of Twitter and then in early February buy them back. Charles Schwab charges a commission of $4.95 for online stock trades and for broker- assisted trades there is an additional $25 service charge, so the total commission is $29.95. a. Suppose that your total transaction costs for selling the 1,200 shares of Twitter in December were $59.95. What was the bid/ask spread for Twitter at the time your trade was executed? b. Given that Twitter is listed on the NYSE, do your total transaction costs for December seem reasonable? Explain why or why not. c. When your February statement arrives in the mail, you see that your total transaction costs for buying the 1,200 shares of Twitter were $47.95. What was the bid/ask spread for Twitter at the time your trade was executed? d. What are your total round-trip transaction costs for both selling and buying the shares, and what could you have done differently to reduce the total costs?
In late December you decide, for tax purposes, to sell a losing position that you hold in Twitter, which is listed on the NYSE, so that you can capture the loss and use it to offset some capital gains, thus reducing your taxes for the current year. However, since you still believe that Twitter is a good long-term investment, you wish to buy back your position in February the following year. To get this done you call your Charles Schwab brokerage account manager and request that he immediately sell your1,200 shares of Twitter and then in early February buy them back. Charles Schwab charges a commission of $4.95 for online stock trades and for broker- assisted trades there is an additional $25 service charge, so the total commission is $29.95. a. Suppose that your total transaction costs for selling the 1,200 shares of Twitter in December were $59.95. What was the bid/ask spread for Twitter at the time your trade was executed? b. Given that Twitter is listed on the NYSE, do your total transaction costs for December seem reasonable? Explain why or why not. c. When your February statement arrives in the mail, you see that your total transaction costs for buying the 1,200 shares of Twitter were $47.95. What was the bid/ask spread for Twitter at the time your trade was executed? d. What are your total round-trip transaction costs for both selling and buying the shares, and what could you have done differently to reduce the total costs?
Chapter6: Deductions And Losses: In General
Section: Chapter Questions
Problem 52P: Brittany Callihan sold stock (basis of 184,000) to her son, Ridge, for 160,000, the fair market...
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Individual Income Taxes
Accounting
ISBN:
9780357109731
Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Individual Income Taxes
Accounting
ISBN:
9780357109731
Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT