On February 20, 2016, Bill purchased stock in Pink Corporation (the stock is not small business stock) for $1,000. On May 1, 2017, the stock became worthless. During 2017, 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 2017 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 $1,000 loss from the worthless stock is a long-term capital loss, offset by the $5,000 long-term capital gain, resulting in a $4,000 net long-term capital loss. The net capital loss is limited to $3,000 for the year.

On February 20, 2016, Bill Purchased Stock in Pink Corporation