Stock basis ?

[cientax]

Have a client that invested $1000 into investment company and received 3467 shares of stock valued at $17335 which would be $5.00 per share. Each year for five years she will be receiving a check for $1620 representing 324 shares that the company buys back, which is $5 per share.This is a "Preferred A Payback Plan", which I have never heard of. At the end of the sixth year they will buy back the remaining shares of 1847 for $9235 which is also $5 per share.

The way I figure it is, is that her basis in the stock is $.2884 per share, $1000/3467 = $.2884. 324 shares x .2884 = $93, therefore she would have a gain of $1527. Am I correct here? She says she is not a partner in this investment company and will not be receiving a K-1. She did receive a 1099-B for the $1620.

Reason I'm asking this question is because I have a feeling that she may dispute this when she comes back in tomorrow. I have not seen her prior years returns to see how it was reported previously.

[JRS]

The majority of my clients are heavy stock market and option traders. You are correct in the way you have handled it. Just like a normal stock trade. 1099-B Gross sale minus the basis equals her cap gain.