Nelson purchase of Black Corporation stock
Not what you're looking for?
Four years ago, Nelson purchased stock in Black Corporation for $37,000. The stock has a current value of $5,000. Nelson needs to decide which of the following alternatives to pursue. Determine the tax effect of each.
a. Without selling the stock, Nelson deducts $32,000 for the partial worthlessness of Black Corporation investment.
B. Nelson sells the stock to his aunt fo $5,000 and deducts a $32,000 long-term capital loss.
c. Nelson sells the stock to a third party and deducts an ordinary loss.
d. Nelson sells the stock to his mother for $5,000 and deducts a $32,000 long term capital loss.
e. Nelson sells the stock to a third party and deducts a $32,000 long term capital loss.
Purchase this Solution
Solution Summary
The 369 word cited solution explains each option presented in the problem together with examples as needed for better understanding.
Solution Preview
a. Without selling the stock, Nelson deducts $32,000 for the partial worthlessness of Black Corporation investment.
A stock must be sold in order to claim a loss. A decrease in value does not constitute a reportable event for tax filing. It may seem unfair but the issue is the objective decreased value and the possibility that it might change again as a taxpayer continues to hold the stock. So, no deal.
http://www.wwwebtax.com/deductions_z_other/worthless_securities.htm
b. Nelson sells the stock to his aunt for $5,000 and deducts a $32,000 long-term capital loss.
This is a ...
Purchase this Solution
Free BrainMass Quizzes
Writing Business Plans
This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.
Operations Management
This quiz tests a student's knowledge about Operations Management
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking
Basic Social Media Concepts
The quiz will test your knowledge on basic social media concepts.