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Mark and Lucy owned two stocks, Tinker Inc., and Chance Inc., that became worthless during year 8. The adjusted basis in Tinker was $300,000. Tinker was incorporated in year 2, and Mark and Lucy purchased their stock in year 4. Their adjusted basis in Chance was $200,000. Chance was incorporated in year 2, and Mark and Lucy were original stockholders. Both stocks were purchased for cash, and each corporation had total capital of $500,000. How much ordinary loss can Mark and Lucy deduct on their joint year 8 tax return as a result of these transactions

Answer :

batolisis

Answer:

$20,000

Explanation:

Adjusted basis in Tinker = $300,000

Tinker was incorporated in year 2 and Mark and Lucy purchased their stock in Year 4

adjusted basis in chance was $200,000, each corporation had total capital of $500,000

Determine how much ordinary loss can mark and Lucy deduct on their joint year 8 tax return

If your value of share falls and you suffer loss, due to section 1244 stock the taxpayer is allowed to deduct loss as an ordinary loss up to maximum of $50,000 for single and $100,000 if MFJ

Hence the loss to be calculated

sales consideration $---

less adjusted tax basis/ loss  = ($20,000 )

based on section 1244 mark and Lucy loss of complete $20,000 will be allowed since it is below $100,000

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