On June 1, 2017, Brady purchased an option to buy 1,000 shares of General, Inc. at $40 per share. He purchased the option for $3,000. It was to remain in effect for five months. The market experienced a decline during the latter part of the year, so Brady decided to let the option lapse as of December 1, 2017. On his 2017 tax return, what should Brady report?

Question

Quizplus · Accepted Answer

The cost of the option ($3,000) is considered a short-term capital loss since the option was held for less than one year. Since Brady decided to let the option lapse and did not exercise it, there is no additional gain or loss to report on his tax return. Therefore, option B is the best choice.

On June 1, 2017, Brady Purchased an Option to Buy