1. An investor own 500 shares of stock that has been held for a 5 years that has a basis of $20,000. The investor also owns 500 shares which have been held for 3 months with a basis of $40,000. At that time the investor sells short 500 shares of stock for $27,500. If two months after entering into the short sale the investor closed the short sale by delivering the shares held for 5 years what is the amount of the gain/loss. Is it long term or short term?

2. An investor sells short 1,000 shares of ABC for $50 per share on July 1, 2016. On July 3, 2017 the investor buys 1,000 shares of ABC for $35 per share. On July 5, 2018 the investor delivers the 1,000 shares acquired on July 3, 2017 to close the short sale. Based on Sec. 1233 when does the investor recognize the gain/loss? How much is the gain/loss? Is the gain/loss long term or short-term?