On June 1,2016,Brady Purchased an Option to Buy 1,000 Shares

question 17

Multiple Choice

On June 1,2016,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 1,2016.On his 2016 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:

Market Exit

Market exit involves a company or business ceasing operations or leaving a particular market or industry.

Competitive Price-searcher

A firm that participates in a market where prices are determined through competition, yet possesses enough market power to influence prices by adjusting its output.

Restaurant Industry

A sector of the economy comprised of establishments primarily engaged in preparing meals, snacks, and beverages for immediate consumption by the public.

Entry Barriers

Obstacles that make it difficult for new entrants to enter a market, potentially including high initial costs, regulatory hurdles, and strong incumbents.