Sam, a single taxpayer, acquired stock in a corporation that qualified as a small business corporation under § 1244 at a cost of $100,000 three years ago.

He sells the stock for $10,000 in the current tax year.

a. How will the loss be treated for tax purposes?

b. Assume instead that Sam sold the stock to his sister, Kara, a few months after it was acquired for $100,000 (its fair market value). If Kara sells the stock for

$60,000 in the current year, how should she treat the loss for tax purposes?