A Worthless Security Had a Holding Period of 6 Months

question 60

Multiple Choice

A worthless security had a holding period of 6 months when it became worthless on December 10, 2014. The investor who had owned the security had a basis of $20,000 for it. Which of the following statements is correct?

• A) The investor has a long-term capital loss of $20,000.
• B) The investor has a short-term capital loss of $20,000.
• C) The investor has a nondeductible loss of $20,000.
• D) The investor has a short-term capital gain of $20,000.
• E) None of the above.

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Definitions:

Crystal Ball

Software used for predictive modeling, forecasting, simulation, and optimization.

Sensitivity Charts

Visual tools that display how changes in input variables affect the output of a model, commonly used in decision analysis.

Cumulative Net Profit

The total amount of profit or loss made over a given period after all expenses are taken into account.

Probability

The quantification of the chance that an event happens, indicated by a numerical range from 0 to 1.