On February 20,2010,Bill purchased stock in Pink Corporation (the stock is not small business stock)for $1,000.On May 1,2011,the stock became worthless.During 2011,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 2011 tax return?

Question

Quizplus · Accepted Answer

The loss on the Pink Corporation stock is treated as a capital loss. Therefore, Bill has a $1,000 long-term capital loss. 
The loss on the § 1244 small business stock is treated as an ordinary loss, up to a maximum of $50,000 for single taxpayers or $100,000 for married taxpayers filing jointly. Since Bill had a $8,000 loss and it is § 1244 stock, he can claim an $8,000 ordinary loss. 
The nonbusiness bad debt is treated as a short-term capital loss. Therefore, Bill has a $9,000 short-term capital loss.
The long-term capital gain of $5,000 will offset some of the losses. 
Overall, Bill has an $8,000 ordinary loss and a $3,000 short-term capital loss.

On February 20,2010,Bill Purchased Stock in Pink Corporation (The Stock