Helmut purchased 100 shares of stock in Caisson Corporation for $1,000 in Year 1. On December 1 of Year 2, he purchased an additional 100 shares in the company for $1,500. On December 28 of Year 2, Helmut sold the 100 shares acquired in Year 1 for $1,200. What is Helmut’s recognized gain or loss from the December 28 sale and what is his resulting basis in the stock purchased on December 1 of Year 2?

On December 28 of Year 2, when Helmut sold the 100 shares acquired in Year 1 for $1,200, we will calculate his recognized gain or loss by subtracting the sale proceeds from the original purchase price of those shares.

The original purchase price for the shares bought in Year 1 (also known as the basis) was $1,000. He sold these shares for $1,200.

Recognized Gain or Loss = Sale Price - Basis Recognized Gain or Loss

 = $1,200 - $1,000 Recognized Gain or Loss 

= $200

Thus, Helmut’s recognized gain from the sale on December 28 is $200.

Regarding the basis in the stock purchased on December 1 of Year 2, the purchase price is typically the basis unless other adjustments need to be made. In this case, Helmut purchased an additional 100 shares for $1,500 on December 1 of Year 2. Since there's no indication that there are other adjustments, this $1,500 is the basis for these shares.

Resulting Basis in Stock Purchased on December 1 of Year 2

 Purchase Price Resulting Basis = $1,500

 Understanding Gain, Loss, and Basis:

Gain: A gain is realized when an asset is sold for more than its original purchase price. In the context of stock, if you sell shares for more than you paid for them the difference is considered a capital gain. This is often subject to capital gains tax with the specific tax rate depending on the holding period of the asset and the jurisdiction in which you reside.

Loss: Conversely, a loss occurs when an asset is sold for less than its original purchase price. This can potentially be used to offset other gains for tax purposes, depending on tax laws in your country of residence.

Basis: Also known as the cost basis, is the original value of an asset for tax purposes. This typically includes the purchase price plus any commissions or fees paid at the time of purchase. When you sell the asset the difference between the sale price and the basis is what determines the amount of gain or loss that is recognized for tax purposes.

Adjusted Basis: Over time, the basis of an asset may need to be adjusted for various reasons such as depreciation, improvements made to the property, or certain events such as stock splits for investments in stocks.

Capital Gains and Capital Losses: The distinction between capital gains and losses is significant for tax purposes. In many jurisdictions, gains are taxable and losses can be deductible. Long-term capital gains (on assets held for more than a year) may be taxed at a different rate than short-term gains (on assets held for less than a year).

Importance of Record Keeping: It's essential for investors to keep accurate records of their purchase prices, sale prices, and any other expenses or adjustments related to their investments to properly calculate their gains or losses for tax reporting purposes.