Question

On September 3, 2019, Willie purchased § 1244 stock in Brass Corporation for $6,000. On December 31, 2019, the stock was worth $8,500. On August 15, 2020, Willie was notified that the stock was worthless. How should Willie report this item on his 2019 and 2020 tax returns?

Answer 1

Willie should report this item on his 2019 and 2020 tax returns as 2019—$0 ; 2020—$6,000 long-term capital loss.

Step-by-step explanation:

In year 2020, the loss of $6,000 is classified as a $6,000 long term capital loss because the stock is not § 1244 stock to Willie.

Therefore, Willie should report this item on his 2019 and 2020 tax returns as 2019—$0 ; 2020—$6,000 long-term capital loss.