On July 20,2008,Matt (Who Files a Joint Return)purchased 3,000 Shares

question 47

Multiple Choice

On July 20,2008,Matt (who files a joint return) purchased 3,000 shares of Orange Corporation stock (the stock is § 1244 small business stock) for $24,000.On November 10,2009,Matt purchased an additional 1,000 shares of Orange Corporation stock for $150,000.On September 15,2010,Matt sold the 4,000 shares of stock for $80,000.How should Matt treat the sale of the stock on his 2010 return?

• A)$94,000 ordinary loss.
• B)$100,000 ordinary loss;$6,000 net capital gain.
• C)$100,000 ordinary loss;$30,000 STCL.
• D)$130,000 ordinary loss;$36,000 LTCG.
• E)None of the above.

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Definitions:

Direct Method

An approach to preparing the cash flow statement where actual cash flows from operating activities are disclosed, as opposed to the indirect method which adjusts net income for non-cash transactions.

Operating Activities

Activities related to the core business functions of a company, including production, sales, and delivery of services, as reflected in its cash flow.

Accrual Basis

An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash transactions occur.

Cash Basis

An accounting method where revenues and expenses are recognized only when cash is received or paid.