A Worthless Security Had a Holding Period of 6 Months

question 64

Multiple Choice

A worthless security had a holding period of 6 months when it became worthless on December 10,2016.The investor who had owned the security had a basis of $20,000 for it.Which of the following statements is correct?

• A)The investor has a long-term capital loss of $20,000.
• B)The investor has a short-term capital loss of $20,000.
• C)The investor has a nondeductible loss of $20,000.
• D)The investor has a short-term capital gain of $20,000.
• E)None of the above.

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Definitions:

CISA

Certified Information Systems Auditor, a designation awarded to IT auditors who pass an exam and meet specific work experience requirements.

IRS

The Internal Revenue Service, a U.S. government agency responsible for the collection of taxes and enforcement of tax laws.

Economic Activities

Activities related to the creation, dispersal, and use of products and services in an economic system.

Personal Guarantee

This is a legal promise made by an individual to repay the borrowing of a business entity in case it fails to do so, thus personally ensuring the debt.