A Worthless Security Had a Holding Period of 11 Months

question 94

Multiple Choice

A worthless security had a holding period of 11 months when it became worthless on November 10,2010.The investor who had owned the security had a basis of $10,000 for it.Which of the following statements is correct?

• A)The investor has a long-term capital loss of $10,000.
• B)The investor has a short-term capital loss of $10,000.
• C)The investor has a nondeductible loss of $10,000.
• D)The investor has a long-term capital gain of $10,000.
• E)None of the above.

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Definitions:

Percentage Change

A mathematical calculation that shows how much a number has increased or decreased compared to its previous value, expressed as a percentage.

Complementary Goods

Goods and services that are used together; when the price of one falls, the demand for the other rises (and conversely).

Inelastic

A term describing demand when it changes by a smaller percentage than changes in price.

Elasticity of Demand

An index indicating the degree to which demand for a product changes in response to a price change, where an elasticity greater than one signifies a high level of responsiveness.