Laurel transfers property with an adjusted basis of 10000 an

Laurel transfers property with an adjusted basis of $10,000 and an FMV of $2,000 to T Corp. for its small business stock. Three years later, the stock becomes worthless. How will the loss be reported on Laurel\'s individual tax return? a. $!0,000 capital loss b $10,000 ordinary loss c. $2,000 ordinary loss and $8,000 capital loss d. $8,000 ordinary loss and $2,000 capital loss

Solution

Solution: $2,000 ordinary loss and $8,000 capital loss

Working: A capital loss occurs when it sold a capital asset, thus 10,000 - 2,000. An ordinary loss occurs from the normal operations of a business when expenses are more than income, thus $2000 .