Asked by Beatriz Sarai on Jun 04, 2024
Verified
Jeannie purchased 1,000 shares in Course Developers for $10,000 on August 11,2016.The company went bankrupt on May 11,2017 with no hope of recovery for the shareholders.On what date is the stock deemed to be worthless and what is the nature of the loss?
A) December 31,2016 short-term loss in 2016.
B) December 31,2017,short-term loss in 2017.
C) December 31,2017,long-term loss in 2017.
D) May 11,2017,short-term loss in 2017.
Worthless
Pertaining to an asset that has lost all monetary value.
Short-term Loss
A monetary deficit incurred from the sale or trade of an asset owned for less than a year.
- Acquire knowledge about the concept of capital gains and losses and the way they are acknowledged.
- Differentiate between typical earnings and capital gain incomes.
Verified Answer
SA
Samer AlanbakiJun 04, 2024
Final Answer :
C
Explanation :
For tax purposes, a stock is considered worthless in the year it becomes completely worthless, which in this case is 2017. The holding period for the stock exceeds one year (from August 11, 2016, to May 11, 2017), making the loss a long-term loss.
Learning Objectives
- Acquire knowledge about the concept of capital gains and losses and the way they are acknowledged.
- Differentiate between typical earnings and capital gain incomes.
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