Problem
Lion Corporation owns 500 shares of Southern Corporation common stock, which it purchased on March 8, 2010, for $7,500. On October 3, 2016, Lion purchases an additional 350 shares for $3,500. On October 12, 2016, it sells the original 500 shares for $7,000. On November 1, 2016, it purchases an additional 50 shares for $350.
1. What is Lion's recognized gain or loss as a result of the sale on October 12, 2016?
2. What are the basis and the holding period of the stock Lion continues to hold?
3. How would your answers to Parts a and b change if the stock Lion purchases during 2016 is Southern nonvoting, nonconvertible, preferred stock instead of Southern common stock?