Question: Al Rodriguez sells 500 shares of Gold Mine Corp short

Al Rodriguez sells 500 shares of Gold Mine Corp. short at $80 per share. The margin requirement is 50 percent. The stock falls to $62 over a three-month time period, and he closes out his position.
a. How much is his initial margin?
b. What is his percentage gain or loss on his initial margin?
c. If he is in a 35 percent tax bracket for short-term capital gains and a 15 percent bracket for long-term capital gains, what is his tax obligation?
d. If the stock went up to $94 instead of down to $62, what would be his dollar loss?
e. Assuming this is his only transaction for the year, how large a tax deduction could he take against other income?

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  • CreatedSeptember 21, 2015
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