Mary sells her personal use automobile for $20,000. She purchased the car two years ago for $17,000. What is Mary's recognized gain or loss? It increased in value due to its excellent mileage, yet safe design.
A) $0
B) $3,000
C) $17,000
D) $20,000
E) None of the above

Question

Quizplus · Accepted Answer

The recognized gain or loss is calculated by subtracting the cost basis (purchase price) from the sales price. In this case, the sales price is $20,000 and the cost basis is $17,000, resulting in a recognized gain of $3,000. The fact that the car increased in value due to its excellent mileage and safe design does not affect the calculation of the recognized gain or loss.

Mary Sells Her Personal Use Automobile for $20,000