1) In the early December 2010, a friend suggested John to buy stock in ABC Aviation Inc. At that time, it was in serious financial straits and was headed toward bankruptcy. Yet, according to John’s friend, value of corporation’s underlying assets was such that shareholders were bound to recover considerably more than the present market price of= $0.50 per share. Excited at chance for a “sure” profit, on December 15, 2010, John bought 20,000 shares for= $10,000. In September 2011, trustee in bankruptcy announced that stock was valueless and that even some of its favoured creditors would not be paid.
2) On June 14, 2011, the Wheat’s sold= 500 shares of Garnet Corporation for= $17,500 ($35 per share). They owned 1,000 shares obtained as follows: 500 shares on November 5, 2007, for $25 share and 500 shares on August 5, 2009, for $30 share. The Wheats didn’t instruct their broker as to which 500 shares to sell.