A sells 1,000 shares of IBM for a loss of $25,000 on 2/7/2016. The shares were acquired on 1/5/2016. On 2/13/2016 A acquired call options for $5,000 to purchase 1,000 shares of IBM that are way out of the money. The calls do not expire until March 2017. In 2017 they expire worthlessly. Can A recognize the $25,000 loss in 2016? How much loss will A recognize on the IBM calls in 2017? What is the nature of the loss?

Answer rating: 100% (QA)

Here in the example A has made loss on two counts The 1st loss is incurred when the shares acquired ... View the full answer