Will a recognize any gain when a lends out the shares

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A owns 1,000 shares of IBM and lends them to B, when their fair market value is $100,000. A’s basis in the shares is $20,000. The agreement between A and B provides that B will return 1,000 shares of IBM to B sometime in the future. The contract also provides that B will make payments to B of an equal amount if IBM makes any distributions to its shareholders during the time the loan is outstanding. A has the right to call back the shares on 3 days’ notice. C also has a $20,000 basis in her shares of IBM. C lends them to D when they have a fair market value of $100,000. C’s contract with D has the same terms that A and b have in their contract, with one exception. The difference is that D will always return $100,000 worth of IBM stock at the termination of the loan. Will A recognize any gain when A lends out the shares? Why or why not? Will C recognize any gain when C lends out the shares? Why or why not?

Reference no: EM131448621

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