When a security becomes worthless
I.no loss can be deducted because a realization has not occurred.
II.the measure of the loss is the adjusted basis of the securities.

A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Question

When a security becomes worthless
I.no loss can be deducted because a realization has not occurred.
II.the measure of the loss is the adjusted basis of the securities.
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A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Quizplus · Accepted Answer

Statement II is correct - when a security becomes worthless, the measure of the loss is the adjusted basis of the securities.
Statement I is incorrect - even though there is no realization of the loss in the sale of the securities, the loss can still be deducted as a worthless security.

When a Security Becomes Worthless