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Exam Series 7 topic 1 question 360 discussion

Actual exam question from FINRA's Series 7
Question #: 360
Topic #: 1
[All Series 7 Questions]

In June, Bubba bought 100 shares of XYZ at $35. In November, he bought a listed put in XYZ with a $35 strike price and a July expiration for a premium of $600.
In April, Bubba exercises the put option and uses his stock for delivery.
What is his resulting tax consequence?

  • A. a $600 capital loss
  • B. neither profit nor loss
  • C. cannot be determined without knowing the market price of XYZ upon exercise
  • D. this is a wash sale and cannot be included in the investor’s tax calculations
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Suggested Answer: A 🗳️
a $600 loss. The strike price and Bubbas purchase price are the same. He has a $600 loss on the option for the premium he paid.

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Davidpsali
3 months, 1 week ago
I thought this should be C, isn't it?
upvoted 1 times
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