Business Homework Solutions
Problem
#135021

Property Transaction: Capital gains and losses

Sarah sells short 100 shares of A stock at $20 per share on January 15, 2006. She buys 200 shares of A stock on April 1, 2006, at $25 per share. On May 2, 2006, she closes the short sale by delivering 100 of the shares purchased on April 1.

a. What are the amount and nature of Sarah's loss upon closing the short sale?
b. When does the holding period for the remaining 100 shares begin?
c. If she sells (at $27 per share) the remaining 100 shares on January 20, 2007, what will be the nature of her gain or loss?

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