A worthless security had a holding period of 6 months when it became worthless on December 10, 2017. The investor who had owned the security had a basis of $20,000 for it. Which of the following statements is correct?

Question

Quizplus · Accepted Answer

A worthless security is treated as a capital loss, and since the holding period for the security is less than one year, the loss is considered as short-term capital loss. The investor can use this loss to offset any capital gains made during the year and up to $3,000 of ordinary income.

A Worthless Security Had a Holding Period of 6 Months