What is Jan's capital gain or loss after selling her Novell stock and repurchasing it?

To determine Jan's capital gain or loss after selling and repurchasing her Novell stock, it's important to consider the concept of wash sales in tax reporting. When a taxpayer sells a security at a loss and then repurchases the same security within a specific time frame (typically 30 days before or after the sale), the loss is disallowed for tax purposes due to the wash sale rule.

In this case, if Jan sold her Novell stock at a loss and immediately repurchased it, the loss would be disallowed, resulting in a zero capital gain or loss for tax reporting purposes. This is because the Internal Revenue Service (IRS) does not allow taxpayers to realize a tax benefit from losses incurred on stocks when they quickly reestablish their position in the same stock. Jan effectively still holds her investment without recognizing any tax loss.

The rationale that leads to $0 as the correct answer hinges on an understanding of how the wash sale rule prevents the recognition of a loss, thereby making the capital gain or loss effectively neutralized.