Question

Compute the following regarding business and nonbusiness bad debts.

On May 9, 2015, Calvin acquired 750 shares of stock in Aero Corporation, a new startup company, for $131,050. Calvin acquired the stock directly from Aero, 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, 2017, Calvin sold all of his Aero stock for $13,105. Assume that Calvin is single.

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:	$

Answer 1

Particulars	Amount ($)
Cost of Aero stock	131050
Less: Sale proceeds of Aero stock	13105
Loss	117945
Less: Maximum amount allowed as ordinary loss due to section 1244	50000
Long term capital loss	67945

Thus, ordinary loss is $50,000 and the balance is long term capital loss as the shares were held for more than 12 months before being sold, i.e. $67,945 is long term capital loss. Hence, there is no short term capital loss.

Loss type	Amount ($)
Ordinary loss	50,000
Short term capital loss	0
Long term capital loss	67,945