J and K, Who File Jointly, Started a Small Business

question 7

Multiple Choice

J and K, who file jointly, started a small business in 1985 by investing $225,000 cash.Their basis in their corporate stock remained at $225,000 until it became worthless during the current year.They have no other gains and losses for the year.How much may they deduct and what is the character of their loss?

• A)$50,000 ordinary loss, $3,000 capital loss deduction, $172,000 long-term capital loss carryover
• B)$100,000 ordinary loss and no capital loss deduction or carryover
• C)$100,000 ordinary loss, $3,000 capital loss deduction, and $122,000 long-term capital loss carryover
• D)$225,000 ordinary loss

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