On June 1, 2018, Brady Purchased an Option to Buy

question 85

Multiple Choice

On June 1, 2018, 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, 2018. On his 2018 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:

Independent Variable

In an experiment, the variable that is manipulated by the researcher to observe its effect on the dependent variable.

Negatively Correlated

Describes a relationship between two variables in which one variable increases as the other decreases, and vice versa.

Wealth

An abundance of valuable financial assets or physical possessions which can include money, properties, and other material assets.

Marital Satisfaction

A measure of the happiness and fulfillment experienced within a marriage or long-term partnership.