Efrain owns 1,000 shares of RJ Inc. common stock which he purchased three years ago for $36,000. Efrain sells the 1,000 shares on October 15, 2018, for $10,000. On November 12, he purchases 400 shares of RJ Inc. preferred stock for $8,000. Efrain's recognized loss on the sale of the 1,000 shares will be
A) $0.
B) $10,400.
C) $15,600.
D) $26,000.
D) $26,000.
Preferred stock is not considered substantially identical to common stock of the same corporation and wash sale rules will not apply. Therefore, the loss of $26,000 ($10,000 - $36,000) is allowed.
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