On July 1, 2004, Marco purchased an option to buy 1,000 shares of Surfing, 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 Marco decided to let the option lapse as of December 1, 2004. On his 2004 income tax return, what should Marco 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.
The solution provides detailed explanations and answer for the taxation problem.