5. Dennis sells short 100 shares of ARC stock for $20 per share ($2,000) on January 15, 2020. At the time Dennis sold the shares, he owned 100 shares of ARC stock in which he had a basis of $22 per share ($2,200). He had owned those shares for two years. On April 1, 2020, he buys 100 shares of ARC stock for $25 per share ($2,500) and closes the transaction by delivering those shares to his broker.

1. What is the amount and character of his loss on the short sale?

2. What is the amount and character of the loss if, instead, Dennis used the 100 shares he already owned to close the transaction?