On June 1, 2017, Brady Purchased an Option to Buy

question 21

Multiple Choice

On June 1, 2017, 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, 2017. On his 2017 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:

Two-Tail

In statistics, a two-tail test is a method in which the critical area of a distribution is two-sided and tests whether a sample is greater than or less than a certain range of values.

Independent Samples T-Test

A statistical test used to determine if there is a significant difference between the means of two independent samples.

Sum of Squares for Error

The sum of the squared differences between the observed values and the predicted values in a dataset, used in statistical analysis.

Randomized Block Design

An experimental design in which subjects are first divided into blocks based on a certain characteristic, and then randomly assigned to different treatment groups within each block.