36. On June 1, 2014, 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, 2014. On his 2014 tax return, what should Brady report?

Question

36.	On June 1, 2014, 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, 2014. On his 2014 tax return, what should Brady report?

Quizplus · Accepted Answer

The lapse of the option is treated as a sale or exchange by § 1234(a)(2).Therefore,a short­term capital loss of $3,000 is reported on his tax return.

36 on June 1, 2014, Brady Purchased an Option to Buy