Please answer the following question:

Facts: Matthew sold 200 shares of Xerox stock on December 23, Year 1. The stock had a basis of $4,000 and was sold for $2,000, resulting in a $2,000 loss realized. On January 10 of Year 2, Matthew caused his IRA to purchase 400 shares of Xerox stock for $4,000.

Issue: Assuming there are available capital gains, may Matthew deduct the $2,000 capital loss on the sale of his Xerox stock on his Year 1 tax return?

1) Give a simple, nontechnical 1 sentence answer to the question posed.

2) What is (are) the Code section(s) at issue?

3) Are any Treasury Regulations relevant?

4) List the case/ruling authority on which you relied to arrive at your answer (please provide the name of any case, not just a citation).

5) Provide a step-by-step description of how you arrived at your answer and located the primary sources that you used to support it (include a discussion of the case law or Ruling authority on which you relied).

Based on the checklist:

Identify all applicable Internal Revenue Code sections.

Identify all applicable Treasury Regulations

Identify applicable cases and/or Revenue Rulings (Use a citator)