On June 1,2015,Brady Purchased an Option to Buy 1,000 Shares

question 48

Multiple Choice

On June 1,2015,Brady purchased an option to buy 1,000 shares of General,Inc.at $40 per share.He purchased the option for $3,000.It was to remain in effect for five months.The market experienced a decline during the latter part of the year,so Brady decided to let the option lapse as of December 1,2015.On his 2015 tax return,what should Brady report?

• A)A $3,000 long-term capital loss.
• B)A $3,000 short-term capital loss.
• C)A $3,000 § 1231 loss.
• D)A $3,000 ordinary loss.
• E)None of the above.

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Definitions:

Conglomerate Mergers

Mergers between firms that operate in unrelated business activities, aiming to diversify product offerings and risks.

Herfindahl-Hirschman Index

An economic indicator that measures the level of concentration and competition within an industry.

Economies of Scale

Refers to the cost advantage experienced by firms when they increase their level of production. The advantage arises due to the inverse relationship between per-unit fixed cost and the quantity produced.

Oligopolistic

Pertaining to an oligopoly, a market structure with a few firms dominating the industry, leading to limited competition.