On September 3, 2016, Able, a Single Individual, Purchased §

question 69

Multiple Choice

On September 3, 2016, Able, a single individual, purchased § 1244 stock in Red Corporation from his friend Al for $60,000. On December 31, 2016, the stock was worth $85,000. On August 15, 2017, Able was notified that the stock was worthless. How should Able report this item on his 2017 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:

Insolvency

The state in which an individual or entity cannot meet its financial obligations as debts become due.

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity of a business.

Benjamin Graham

Widely recognized as the father of value investing, he was an economist, professional investor, and Columbia Business School professor.

Investment Funds

Pooled funds from investors that are managed on their behalf by an investment manager, investing in a variety of assets to meet specific investment goals.