Amelia purchased 400 shares of BBC common stock several years ago for $1,600. On June 30, Amelia sold the shares of BBC common for $600 and then purchased 225 shares of BBC preferred stock two days later for $800. The BBC preferred stock is not convertible into BBC common stock. What is Amelia’s deductible loss from the sale of the 400 shares of BBC common stock?
Jorge received a stock tip from a long-time friend. Since he did not have enough cash on hand to invest, Jorge decided to take out a $20,000 loan in order to buy the stock. The loan terms were 8 percent interest with interest-only payments due each year for five years. At the end of the five-year period the entire loan principal is due. When Jorge closed on the loan on April 1, 2017, he decided to invest $16,000 in stock and to use the remaining $4,000 to purchase a jet-ski. Jorge is unsure how he will treat the interest paid on the $20,000 loan. In 2017, Jorge paid $1,200 interest expense on the loan. For tax purposes, how should he treat the 2017 interest expense? (Hint: Visit www.irs.gov and consider IRS Publication 550)
: Discuss the way tax law shapes social policy by methods such as imposing “sin-taxes,” and also by preferential taxation in some areas, and by allowing certain deductions in others. What does this mean? Does it work? Good idea? Bad idea?