Roseanne sells her personal automobile for $1,000. The car cost her $12,000 nine years ago. What are the tax effects of the current sale?
I.Roseanne recognizes a deductible loss of $11,000 on her current-year tax return due to the capital recovery concept.
II.Roseanne recognizes no loss on her tax return due to lack of business purpose with the automobile.

Question

Roseanne sells her personal automobile for $1,000. The car cost her $12,000 nine years ago. What are the tax effects of the current sale?
I.Roseanne recognizes a deductible loss of $11,000 on her current-year tax return due to the capital recovery concept.
II.Roseanne recognizes no loss on her tax return due to lack of business purpose with the automobile.
​

Quizplus · Accepted Answer

Since the car was sold for less than its original cost, there is a loss for Roseanne, but since it was her personal car and not used for business purposes, she cannot deduct any loss on her tax return. Therefore, statement II is correct and statement I is incorrect.

Roseanne Sells Her Personal Automobile for $1,000