Identify Which of the Following Statements Is True

question 32

Multiple Choice

Identify which of the following statements is true.

• A) The loss recognized by a corporate shareholder on the worthlessness of the controlled subsidiary's stock is an ordinary loss.
• B) The loss that is recognized by an individual shareholder on the liquidation of a corporation is a capital loss, up to certain limits, if the stock is Sec. 1244 stock.
• C) A loss recognized by a shareholder upon complete liquidation of a corporation may not qualify for ordinary loss treatment if the stock is Sec. 1244 stock.
• D) All of the above are false.

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Definitions:

Other than Temporary

Refers to impairments or reductions in asset values that are not expected to be recovered in the short term.

Stockholders' Equity

The residual interest in the assets of a corporation that remains after deducting its liabilities, representing ownership interest.

Market Value

Market value is the current price at which an asset or service can be bought or sold in a competitive and open market.

Common Stock

A form of corporate equity ownership, a type of security that represents ownership in a corporation, and entitles the holder to vote on corporate matters and receive dividends.