Determine the tax effect of each

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Four years ago Nelson purchased stock in Black Corporation for $37,000. The stock has a current value of $5,000. Nelson needs to decide which of the following alternatives to pursue. Determine the tax effect of each.

a. Without selling the stock, Nelson deducts $32,000 for the partial worthlessness of the Black Corporation investment.

b. Nelson sells the stock to his aunt for $5,000 and deducts a $32,000 long-term capital loss.

c. Nelson sells the stock to a third party and deducts an ordinary loss.

d. Nelson sells the stock to his mother for $5,000 and deducts a $32,000 long-term capital loss.

e. Nelson sells the stock to a third party and deducts a $32,000 long-term capital loss.

 

Reference no: EM13513759

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