Hope Corporation was liquidated four years ago. Teresa reported a $40,000 long-term capital gain due to the liquidation on her individual tax return. This year, Teresa pays $6,000 as part of the settlement of a lawsuit against Hope. Due to the $6,000 payment, Teresa recognizes a

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The $6,000 payment Teresa makes as part of the settlement of a lawsuit against Hope Corporation, which was liquidated, can be recognized as a long-term capital loss. This is because the loss is directly related to the liquidation of Hope Corporation, from which Teresa previously reported a long-term capital gain. The nature of the loss is determined by the original investment, which in this case was a capital investment in Hope Corporation.

Hope Corporation Was Liquidated Four Years Ago