Question

Exercise 6-3 (Algorithmic) (LO. 2) On May 9, 2017, Calvin acquired 350 shares of stock in Hobbes Corporation, a new startup company, for $121,800. Calvin acquired the stock directly from Hobbes, 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, 2019, Calvin sold all of his Hobbes stock for $12,180. Assuming that Calvin is single, determine his tax consequences as a result of this sale. If an amount is zero, enter "O". As a result of the sale, Calvin has: Ordinary loss: 0 Short-term capital loss: 0 Long-term capital loss: 0

Answer 1

Ans: Ordinary Loss= $50,000 {loss limited to $50,000 for single taxpayer}

Short term capital loss= It will be zero in case where Period is one year or less

Long term capital loss= $59,620

Working Note:

Value of shares acquired=121,800

Less: Selling price= (12,180)

Ordinary Loss= (50,000)

Long term capital loss= 59,620