Troy Is Not a Very Astute Investor

Question 105

Troy is not a very astute investor.He has a knack for investing in losing stocks.In his latest investment move, he has realized a loss of about $40,000 (original basis of $50,000; current fair market value of $10,000)in High Tech, Inc.The good news is that unlike prior years, he actually has $45,000 of gains that he can use to offset the loss.Troy is considering either selling the High Tech, Inc.stock to his sister, Louise, or on the stock market.Which should he choose and why? Please explain why the IRS may treat the two transactions differently.