On February 20,2012,Bill purchased stock in Pink Corporation (the stock is not small business stock)for $1,000.On May 1,2013,the stock became worthless.During 2013,Bill also had an $8,000 loss on § 1244 small business stock purchased two years ago,a $9,000 loss on a nonbusiness bad debt,and a $5,000 long-term capital gain.How should Bill treat these items on his 2013 tax return?

Question

Quizplus · Accepted Answer

The $8,000 loss on § 1244 stock is treated as an ordinary loss. The $9,000 nonbusiness bad debt is treated as a short-term capital loss. The worthless stock is treated as a long-term capital loss of $1,000. After offsetting the $5,000 long-term capital gain, Bill has a $4,000 net long-term capital loss, which can offset up to $3,000 of ordinary income, leaving a $3,000 short-term capital loss.

On February 20,2012,Bill Purchased Stock in Pink Corporation (The Stock