Question

PLEASE HELP!!

LeBron buys 500 shares of Tiger Corporation for $10 a share. The corporation’s president is caught committing fraud and the stock drops to $3 a share. LeBron sells all his shares. How much can he take off his income as a capital loss this year?

Answer 1

$3,000

Explanation:

When you do the math your total comes out to $3500, but the most money that you are allowed to take of your income as a capital loss is $3000 so the answer is $3000.

Answer 2

$3500 he can take off his income as a capital loss this year.

Explanation:

Capital loss:

1. It is the loss realized when any investment's value gets decreased.

2. quantitatively it is the difference of price at which the invest is bought and price at which the investment is sold.

3. The condition for capital loss is that , selling price of investment should be less that buying price of same investment.

_________________________________________

Given

No. of shares bought = 500

cost of 1 share = $10

cost of 500 share = 500 *$10 = $5000

Thus, buying price of invest = $5000

Now price of share drops to $3 per share

thus total price of share now = 500*$3 = $1500

Thus, he sold his investment at $1500

capital loss incurred by him = $5000 - $1500 = $3500 (Answer)