The following assets in Jack's business were sold in 2012: The office equipment had a zero adjusted basis and was purchased for $8,000.The automobile was purchased for $2,000 and sold for $1,200.The ABC stock was purchased for $1,800 and sold for $3,200.In 2012 (the year of sale),Jack should report what amount of net capital gain and net ordinary income?
A) $1,700 LTCG.
B) $600 LTCG and $300 ordinary gain.
C) $1,400 LTCG and $300 ordinary gain.
D) $2,500 LTCG and $800 ordinary loss.
E) None of the above.

Question

The following assets in Jack's business were sold in 2012:  The office equipment had a zero adjusted basis and was purchased for $8,000.The automobile was purchased for $2,000 and sold for $1,200.The ABC stock was purchased for $1,800 and sold for $3,200.In 2012 (the year of sale),Jack should report what amount of net capital gain and net ordinary income?
A) $1,700 LTCG. 
B) $600 LTCG and $300 ordinary gain. 
C) $1,400 LTCG and $300 ordinary gain. 
D) $2,500 LTCG and $800 ordinary loss. 
E) None of the above.

Quizplus · Accepted Answer

The net capital gain is calculated as follows:

- Sale proceeds of ABC stock: $3,200
- Cost basis of ABC stock: $1,800
- Capital gain on ABC stock: $3,200 - $1,800 = $1,400 (long-term)

The net ordinary income is calculated as follows:

- Sale proceeds of automobile: $1,200
- Adjusted basis of automobile: $2,000
- Ordinary loss on automobile: $2,000 - $1,200 = $800
- No ordinary gain or loss on office equipment since it had a zero adjusted basis.

Therefore, the correct answer is C) $1,400 LTCG and $300 ordinary gain.

The Following Assets in Jack's Business Were Sold in 2012