Amy, a single individual and sole shareholder of Brown Corporation, sold all of the Brown stock for $30,000. Amy's stock basis was $150,000. She had owned the stock for 3 years. Brown Corporation meets the Section 1244 requirements. Amy has
A) a $50,000 ordinary loss and $70,000 LTCL.
B) a $50,000 STCL and a $70,000 LTCL.
C) a $100,000 ordinary loss and a $20,000 LTCL.
D) a $100,000 LTCL and a $20,000 ordinary loss.
A) a $50,000 ordinary loss and $70,000 LTCL.
The loss realized is $30,000 - $150,000 = ($120,000). Since the stock is Section 1244 stock and Amy is an original owner, the first $50,000 (for single individuals) of the loss is treated as ordinary. The remainder of $70,000 ($120,000 - $50,000) is treated as long-term capital loss since Amy held the stock longer than 12 months.
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