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What is the amount and character of tax gain

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Reference no: EM132461406

Question 1 - X is a calendar year-end corporation with the dollar as its functional currency. On 10/1/2014, X enters into a forward contract to buy 100,000 Euros for delivery on 3/1/2015. By 12/31/2014, the forward contract has appreciated by $1,000. Assuming there are regulated futures contracts traded in Euros, what is the amount and character of taxable income/(loss) X recognized on 12/31/2014? Assume X does not make any special elections.

A. $0

B. $1,000 Ordinary Income

C. $400 Short Term Capital Gain and $600 Long Term Capital Gain

D. $1,000 Long Term Capital Gain

Question 2 - A has dollar as her functional currency. A buys a €100,000 bond when €1 = $1.12. After 2 years, A sells the bond for €95,000, when €1 = $1.22. What is the amount and character of tax gain/loss A recognizes?

A. $5,000 ordinary loss

B. $5,000 capital loss

C. $3,900 ordinary gain

D. $10,000 ordinary gain/$5,600 capital loss

Reference no: EM132461406

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