The following assets in Jack's business were sold in 2018: $$\begin{array} { l l l }
\text { Asset } & \text { HoldingPeriod } & \text { Gain/(Loss) Office } \
\text { equipment } & 6 \text { years } & \$ 1,100 \
\text { Automobile } & 8 \text { months } & ( \$ 800 ) \mathrm { ABC } \mathrm { stock } \
\text { (capital asset) } & 2 \text { years } & \$ 1,400
\end{array}$$ Office equipment, purchased for $8,000, had a zero adjusted basis. 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 2018 (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 these.

Question

The following assets in Jack's business were sold in 2018: $$\begin{array} { l l l } 
\text { Asset } & \text { HoldingPeriod } & \text { Gain/(Loss) Office } \
\text { equipment } & 6 \text { years } & \$ 1,100 \
\text { Automobile } & 8 \text { months } & ( \$ 800 ) \mathrm { ABC } \mathrm { stock } \
\text { (capital asset) } & 2 \text { years } & \$ 1,400
\end{array}$$ Office equipment, purchased for $8,000, had a zero adjusted basis. 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 2018 (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 these.

Quizplus · Accepted Answer

The net capital gain is $1,400 from the sale of ABC stock, a capital asset held for more than one year. The net ordinary income is $300, which is the gain from the sale of office equipment ($1,100), treated as ordinary income because it's depreciated property with a zero adjusted basis. The loss from the automobile ($800) cannot offset ordinary income because it's a personal use asset.

The Following Assets in Jack's Business Were Sold in 2018