R2 M2 - Gains & Losses

Question 1

Sands purchased 100 shares of Eastern Corp. stock for $18,000 on April 1 of the prior year. On February 1 of the current year, Sands sold 50 shares of Eastern for $7,000. Fifteen days later, Sands purchased 25 shares of Eastern for $3,750. What is the amount of Sand’s recognized gain or loss?

A.	$500

B.	$0

C.	$1,000

D.	$2,000

Answer 1

Question 2

If a security becomes worthless in the current taxable year, it is treated as sold or exchanged on:

A.	The date it is deemed worthless.

B.	The last day of the preceding taxable year.

C.	The first day of the current taxable year.

D.	The last day of the current taxable year.

Answer 2

Choice “D” is correct. The rule is that a worthless security is treated as being sold or exchanged on the last day of the year it becomes worthless.

Choice “A” is incorrect. The correct answer is the last day of the current year, not the date it is deemed worthless.

Choice “B” is incorrect. The correct answer is the last day of the current year, not the preceding year.

Choice “C” is incorrect. The correct answer is the last day of the current year, not the first day.

Question 3

Worthless stock and securities:

Answer 3

Worthless stock and securities are treated as capital loss. If they became worthless in February 2023, they would be considered as if they were sold on the last day of the taxable year they became worthless (December 2023).

Question 4

If a security becomes worthless in the current taxable year, it is treated as sold or exchanged on:

A.	The date it is deemed worthless.

B.	The last day of the preceding taxable year.

C.	The first day of the current taxable year.

D.	The last day of the current taxable year.

Answer 4

Choice “D” is correct. The rule is that a worthless security is treated as being sold or exchanged on the last day of the year it becomes worthless.

Choice “A” is incorrect. The correct answer is the last day of the current year, not the date it is deemed worthless.

Choice “B” is incorrect. The correct answer is the last day of the current year, not the preceding year.

Choice “C” is incorrect. The correct answer is the last day of the current year, not the first day.