On April 4, 2022, Rex thought Elite stock was overvalued. Convinced the price would decline, he borrowed 100 shares of Elite from his broker at $35 per share. He then immediately sold the shares in a short sale. A few months later, the company posted better-than-expected earnings. On August 1, 2022, Rex purchased 100 shares of Elite stock at $40 per share and then delivered them to his broker to close the short sale. How should this transaction be reported on his tax return?

A. $4,000 capital gain.

B. $500 capital gain.

C. $500 capital loss.

D. $4,000 capital loss.

Answer rating: 100% (QA)

The detailed answer for the above question is provided below In this scenario 1 Rex sold short ... View the full answer