Penny,a Cash-Basis Taxpayer,reported a $15,000 Long-Term Capital Gain on the Exchange

question 91

Essay

Penny,a cash-basis taxpayer,reported a $15,000 long-term capital gain on the exchange of her Midwest Corporation stock when the corporation liquidated in 2012.Midwest subsequently lost a lawsuit and Penny paid an additional $3,000 in 2014 as her part of the settlement.What are the tax consequences to Penny in 2014 of the $3,000 additional payment she made?

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Definitions:

Concrete Operational

A stage in Piaget's theory of cognitive development, occurring roughly between the ages of 7 and 12, during which children gain the ability to think logically about concrete events.

Sensorimotor

Referring to a developmental stage in children characterized by the coordination of sensory experiences with motor actions.

Behavioral Perspective

An approach in psychology focusing on observable behaviors and the ways in which they are learned through interactions with the environment.

Human Impulses

Innate inclinations or promptings that drive individuals to think or act in certain ways without conscious deliberation.