Tom has owned 20 shares of Burgundy Corporation stock for four years.He sells the stock short for a total of $800.One month later,he closes the short sale by purchasing and delivering 20 shares of Burgundy Corporation stock for a total of $600.Tom has a $200 short-term capital gain.

Question

Quizplus · Accepted Answer

When Tom sells the 20 shares short, he borrows them from someone else and sells them for $800. One month later, he purchases 20 shares for $600 and delivers them back to the lender to close the short sale. Since he sold the shares for $800 and bought them back for $600, he made a $200 profit, which is a short-term capital gain.

Tom Has Owned 20 Shares of Burgundy Corporation Stock for Four