Mrs Tinker paid $78,400 to purchase 15,000 shares of HiFli common stock in 2007. This year, HiFli declared bankruptcy and announced that its stock has no value. What is the tax consequence to Mrs Tinker of this bad news?

Question

Quizplus · Accepted Answer

Mrs Tinker can claim a capital loss of the full $78,400 since the stock has become worthless due to the company's bankruptcy. This loss can be used to offset capital gains for the year and can also be carried forward to future years to offset future capital gains. Ordinary abandonment loss is not applicable in this scenario, and there is no need for Mrs Tinker to dispose of the stock to recognize the loss.

Mrs Tinker Paid $78,400 to Purchase 15,000 Shares of HiFli