The following assets in Jack's business were sold in 2014:
$\begin{array}{lll}
\text { Asset } & \text { Holding Period }&\text { Gain/(Loss) }\
\text { Office Equipment } & 6 \text { years } & \$ 1,100 \
\text { Automobile } & 8 \text { months } & (\$ 800) \
\text { ABC Stock (capital asset) } & 2 \text { years } & \$ 1,400
\end{array}$

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 2014 (the year of sale), Jack should report what amount of net capital gain and net ordinary income?

Question

The following assets in Jack's business were sold in 2014:
$\begin{array}{lll}
\text { Asset } & \text { Holding Period }&\text { Gain/(Loss) }\
\text { Office Equipment } & 6 \text { years } & \$ 1,100 \
\text { Automobile } & 8 \text { months } & (\$ 800) \
\text { ABC Stock (capital asset) } & 2 \text { years } & \$ 1,400
\end{array}$

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 2014 (the year of sale), Jack should report what amount of net capital gain and net ordinary income?

Quizplus · Accepted Answer

The office equipment had a zero adjusted basis and was sold for $3,000 resulting in a $3,000 gain that is classified as Section 1231 gain. The automobile was sold for a loss of $800, which is classified as an ordinary loss. The ABC stock was sold for a gain of $1,400, which is classified as a long-term capital gain. Therefore, the net capital gain is $1,400 and the net ordinary income is $300.

The Following Assets in Jack's Business Were Sold in 2014