Answer:
4) The transaction will be treated as a short-term capital asset sale.
Explanation:
This person engaged in a short sale, which is classified as a short term capital asset sale since the holding period was shorter than 1 year (March 15 - December 21).
A short sale takes place when an investor sells property that he either doesn't own, or owns but doesn't want to sell. This sale is done in two steps:
The investor cannot realize any gain or loss until he/she actually returns the stocks to the lender. If the investor managed to buy the stocks at a lower price, he/she will have realized a capital gain.