In 1996, Mr

question 48

Multiple Choice

In 1996, Mr. Exton, a single taxpayer, contributed $30,000 in exchange for 100 shares of Morton stock. In 2005, he paid $43,000 to another shareholder to purchase 100 more shares of Morton stock. Morton stock qualified as Section 1244 stock when it was issued. This year, Mr. Exton sold his 200 Morton shares for $250 per share. What is the amount and character of Mr. Exton's recognized loss?

• A) $23,000 ordinary loss
• B) $23,000 long-term capital loss
• C) $3,000 long-term capital gain and $30,000 ordinary loss
• D) $5,000 long-term capital loss and $18,000 ordinary loss

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Definitions:

Interest

The cost of borrowing money, expressed as a percentage of the total amount loaned, or the income earned on invested capital.

Bonds Discount

The difference when bonds are sold for less than their face value.

Bonds Premium

The amount by which the price of a bond exceeds its face value, typically because the market interest rate is below the coupon rate of the bond.

Premium on Bonds Payable

The amount by which a bond's selling price exceeds its principal amount or face value.