1. In January, Lance sold stock with a cost basis of $26,000 to his brother, James, for $24,000, the fair market value of the stock on the date of sale. Five months later, James sold the same stock through his broker for $27,000. What is the tax effect of these transactions?

	a.	Disallowed loss to Lance of $2,000; gain to James of $1,000.
	b.	Deductible loss to Lance of $2,000; gain to James of $3,000
	c.	Disallowed loss to Lance of $2,000; gain to James of $3,000.
	d.	Disallowed loss to James of $2,000; gain to Lance of $1,000.

2. In January, Lance sold stock with a cost basis of $26,000 to his brother, James, for $24,000, the fair market value of the stock on the date of sale. Five months later, James sold the same stock through his broker for $27,000. What is the tax effect of these transactions?

	a.	Disallowed loss to Lance of $2,000; gain to James of $1,000.
	b.	Deductible loss to Lance of $2,000; gain to James of $3,000
	c.	Disallowed loss to Lance of $2,000; gain to James of $3,000.
	d.	Disallowed loss to James of $2,000; gain to Lance of $1,000.