In january, lance sold stock with a cost basis of $26,000 to his brother, james, for $24,000, the fair market value of the stock on the date of sale. five months later, james sold the same stock through his broker for $27,000. what is the tax effect of these transactions?

For Lance:

short-term capital loss for 2,000

For James:

short-term capital gain for 3,000

Explanation:

As the stocks weren't held for more than a two-year period, these are considered short-term gain. Thus; taxes at the same income bracket as teh seller.

Lance will have a deducion for 2,000

While James will pay taxes for 3,000