Question

Compute the following regarding business and nonbusiness bad debts. On May 9, 2014, Calvin acquired 250 shares of stock in Aero Corporation, a new startup company, for $68,750. Calvin acquired the stock directly from Aero, and it is classified as § 1244 stock (at the time Calvin acquired his stock, the corporation had $900,000 of paid-in capital). On January 15, 2016, Calvin sold all of his Aero stock for $7,000. Assume that Calvin is single. If an amount is zero, enter "0". As a result of the sale, Calvin has:

Ordinary loss: $

Short-term capital loss: $

Long-term capital loss: $

Answer 1

Ordinary loss is $50,000

and

Long term capital loss = $11,750

and

Short term capital loss = $ 0

Step-by-step explanation:

given data

purchased = $68,750

Sale = $7,000

classified = § 1244 stock

solution

we know here that loss will be

loss = $68,750 -$7,000

loss= $61,750

classified = § 1244 stock so here loss to be treated as ordinary losses instead of capital losses from share and deducted

individual tax returns = maximum of $50,000

and for joint return = $100,000

so

balance loss = $61,750-$50,000 = $11,750

so it is s deducted as Long-term capital loss

and it is no Short term capital loss

hence Ordinary loss is $50,000

and

Long term capital loss = $11,750

and

Short term capital loss = $ 0