Reference no: EM132965226
Preston purchases 1,000 shares of BIG Corp on April 1, 20x1 for $2,500. She sells short 1,000 shares of BIG Corp on December 1, 20x1, for $3,750. This short sale results in a constructive sale. She closes the short sale on January 15, 20x2, by purchasing & delivering 1,000 shares of BIG Corp for $3,250. She sells the original position on December 15, 20x2 for $3,000.
Problem 1: What is the amount and character of taxable income that Preston must recognize in 20x2?
a. $500 short-term capital gain & $500 long-term capital gain
b. $250 short-term capital loss
c. $1,000 short-term capital gain
d. $1,000 short-term capital loss
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