Compute the following regarding business and nonbusiness bad debts. On May 9, 20
ID: 2513212 • Letter: C
Question
Compute the following regarding business and nonbusiness bad debts.
On May 9, 2015, Calvin acquired 750 shares of stock in Aero Corporation, a new startup company, for $131,050. Calvin acquired the stock directly from Aero, 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, 2017, Calvin sold all of his Aero stock for $13,105. Assume that Calvin is single.
If an amount is zero, enter "0".
As a result of the sale, Calvin has:
Ordinary loss: $ Short-term capital loss: $ Long-term capital loss: $Explanation / Answer
Particulars
Amount ($)
Cost of Aero stock
131050
Less: Sale proceeds of Aero stock
13105
Loss
117945
Less: Maximum amount allowed as ordinary loss due to section 1244
50000
Long term capital loss
67945
Thus, ordinary loss is $50,000 and the balance is long term capital loss as the shares were held for more than 12 months before being sold, i.e. $67,945 is long term capital loss. Hence, there is no short term capital loss.
Loss type
Amount ($)
Ordinary loss
50,000
Short term capital loss
0
Long term capital loss
67,945
Particulars
Amount ($)
Cost of Aero stock
131050
Less: Sale proceeds of Aero stock
13105
Loss
117945
Less: Maximum amount allowed as ordinary loss due to section 1244
50000
Long term capital loss
67945
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