On February 20,2015,Bill purchased stock in Pink Corporation (the stock is not small business stock)for $1,000.On May 1,2016,the stock became worthless.During 2016,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 2016 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. Bill can deduct $3,000 of the short-term capital loss against ordinary income.

On February 20,2015,Bill Purchased Stock in Pink Corporation (The Stock