Ask Question
19 July, 18:19

On May 9, 2017, Calvin acquired 250 shares of stock in Hobbes Corporation, a new startup company, for $68,750. Calvin acquired the stock directly from Hobbes, and it is classified as § 1244 stock (at the time Calvin acquired his stock, the corporation had $900,000 of paid-in capital). On January 15, 2019, Calvin sold all of his Hobbes stock for $7,000. Assuming that Calvin is single, determine his tax consequences as a result of this sale. If an amount is zero, enter "0". As a result of the sale, Calvin has: Ordinary loss: $ Short-term capital loss: $ Long-term capital loss: $

+2
Answers (1)
  1. 19 July, 21:25
    0
    Ordinary Loss: $50,000

    Short Term Capital Loss : 0

    Long Term Capital Loss : $11,750.

    Explanation:

    The objective of this question is to determine his tax consequences as a result of this sale

    From the question given; the result of the sale which Calvin possess is as follows:

    Ordinary Loss: The Ordinary loss is said to be limited to $50,000 for individual. (According to Section 1244; the section give opportunities for losses from sale of shares of small and domestic corporations to be deducted as ordinary losses instead of as capital losses up to a maximum of $50,000 for individual.)

    Short Term Capital Loss is said to be zero If it's one year or less.

    Long Term Capital Loss is $11,750. How obtained this desired output of $11,750 is as a result of the following:

    We know that:

    Value of shares Acquired $68,750

    Calvin sold all of his Hobbes stock for $7,000 (i. e the selling price rate)

    Also, the Ordinary loss = $50,000

    Therefore:

    Value of shares Acquired = $68,750 - $7,000 - $50,000 = $11,750
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “On May 9, 2017, Calvin acquired 250 shares of stock in Hobbes Corporation, a new startup company, for $68,750. Calvin acquired the stock ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers