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:

Delight

A high degree of pleasure or enjoyment that surprises or greatly pleases someone.

Misery

A state of great distress, discomfort, or sadness experienced by an individual or group.

Secondary Appraisal

The assessment of one's ability to cope with or manage the consequences of a stressful event after recognizing it as a threat.

Primary Appraisal

The initial evaluation process where an individual assesses the significance of an event or situation as stressful, positive, or irrelevant.