Bennett, Who Is Single, Owns All of the Outstanding Stock

question 76

Multiple Choice

Bennett, who is single, owns all of the outstanding stock of Bennett Company. In 2017 Bennett sells all of his stock in the company for $30,000. If the stock qualifies as Section 1244 and his basis in the stock is $140,000, how is his loss on the sale classified for tax purposes?

• A) $110,000 capital loss
• B) $110,000 ordinary loss
• C) $60,000 capital loss; $50,000 ordinary loss
• D) $100,000 ordinary loss; $10,000 capital loss
• E) None of the above

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Definitions:

Sole Proprietorship

A type of enterprise that is owned and run by one person and in which there is no legal distinction between the owner and the business entity.

Business

The practice of making one's living by engaging in commerce, trading, or offering services.

Start

The beginning or initiation of an action, process, or operation.

General Partnership

A business structure where two or more individuals share ownership, profits, and responsibilities.