Question

Exercise 18-25 (Algorithmic) (LO. 6) Several years ago, Minjun, who is single, acquired § 1244 stock in Blue Corporation at a cost of $160,400. He sells the Blue stock for $16,040 in the current year. Determine the amount and nature of Minjun's gain or loss recognized this year. Minjun's sale of Blue Corporation stock produces a total loss of $ of which $ is treated as a capital loss.

Answer 1

Solution:

Minjun`s sale of Blue Corporation stock produces a total loss of $ 144,360 of which $ 94,360 is treated as a capital loss.

Selling Price of Blue Corporation Stock	$            16,040
Cost Price of Blue Corporation Stock	$       (160,400)
Total Gain / (loss)	$       (144,360)
Ordinary Loss	$            50,000
Capital Loss	$            94,360

Notes:

1) As per acquired 1244 stock of blue corporation, First $50,000 of total loss will get ordinary loss treatment and remaining loss of $ 94,360 ($144,360 - $ 50,000)will be capital loss