On July 20, 2018, Matt (Who Files a Joint Return)

question 29

Multiple Choice

On July 20, 2018, Matt (who files a joint return) purchased 3,000 shares of Orange Corporation stock (the stock is § 1244 small business stock) for $24,000.On November 10, 2018, Matt purchased an additional 1,000 shares of Orange Corporation stock from a friend for $150,000.On September 15, 2019, Matt sold the 4,000 shares of stock for $120,000.How should Matt treat the sale of the stock on his 2019 return?

• A)$54,000 ordinary loss.
• B)$100,000 ordinary loss; $46,000 net capital gain.
• C)$100,000 ordinary loss; $20,000 STCL.
• D)$130,000 ordinary loss; $66,000 LTCG.
• E)None of these.

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Definitions:

Issuing Company

A company that offers its securities for sale to the public or to private investors.

Indenture

A formal legal agreement, contract, or document, especially one outlining the terms of a bond or other financial debt instrument.

Debenture

A type of debt instrument that is not secured by physical assets or collateral.

Unsecured Bond

A bond that does not have specific assets as collateral, making it riskier than secured bonds, thereby relying on the issuer's creditworthiness.