A worthless security had a holding period of six months when it became worthless on December 10, 2018.The investor who had owned the security had a basis of $20,000 for it.Which of the following statements is correct?
A)The investor has a long-term capital loss of $20,000.
B)The investor has a short-term capital loss of $20,000.
C)The investor has a nondeductible loss of $20,000.
D)The investor has a short-term capital gain of $20,000.
E)None of these.

Question

Quizplus · Accepted Answer

Since the holding period for the security is less than one year, it is considered a short-term capital loss. The investor's basis was $20,000, and since the security became worthless, the loss is also $20,000. Therefore, the correct statement is that the investor has a short-term capital loss of $20,000.

A Worthless Security Had a Holding Period of Six Months