Question

On June 1, 2019, Brady purchased an option to buy 1,000 shares of General, Inc. at $40 per share. He purchased the option for $3,000. It was to remain in effect for five months. The market experienced a decline during the latter part of the year, so Brady decided to let the option lapse as of December 1, 2019. On his 2019 tax return, what should Brady report?

Answer 1

Brady should report a short term capital loss of $3,000.

Step-by-step explanation:

Short term capital losses are financial losses resulting from the sale of an asset that you have held for less than a year. If the loss results from the sale of an asset that was held for more than a year it is considered a long term capital loss.