On June 1,2011,Bruce purchased an option to buy 1,000 shares of General,Inc.at $30 per share.He purchased the option for $2,000.It was to remain in effect for six months.The market experienced a decline during the latter part of the year,so Bruce decided to let the option lapse as of December 1,2011.On his 2011 tax return,what should Bruce report?

Question

Quizplus · Accepted Answer

Since Bruce is letting the option lapse, he is not exercising it and therefore not buying any shares. Therefore, he incurs a loss equal to the purchase price of the option, which is a short-term capital loss since the option was held for less than a year.

On June 1,2011,Bruce Purchased an Option to Buy 1,000 Shares