On September 3, 2017, Able, a Single Individual, Purchased §

question 72

Multiple Choice

On September 3, 2017, Able, a single individual, purchased § 1244 stock in Red Corporation from his friend Al for $60,000. On December 31, 2017, the stock was worth $85,000. On August 15, 2018, Able was notified that the stock was worthless. How should Able report this item on his 2018 tax return?

• A) $85,000 capital loss.
• B) $85,000 ordinary loss.
• C) $50,000 ordinary loss and $35,000 capital loss.
• D) $60,000 ordinary loss.
• E) None of the above.

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Definitions:

Accounting Period

A specific time period during which financial transactions are recorded and financial statements are prepared.

Current Assets

Assets expected to be converted into cash, sold, or consumed within a year or the operating cycle, whichever is longer.

Current Liabilities

Short-term financial obligations due within one year or within the normal operating cycle of the business, whichever is longer.

Current Ratio

The current ratio is a financial metric that measures a company's ability to pay short-term obligations with its short-term assets.