The following assets in Jack's business were sold in 2015: Asset Holding Period Gain/(Loss) Office Equipment 6 years $1,100 Automobile 8 months ($ 800) ABC Stock (capital asset) 2 years $1,400 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 2015 (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 2015: Asset Holding Period Gain/(Loss) Office Equipment 6 years $1,100 Automobile 8 months ($ 800) ABC Stock (capital asset) 2 years $1,400 ​ 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 2015 (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

To calculate the net capital gain, we need to first calculate the total gain and total loss from the sale of capital assets.

Total gain = $1,100 + $1,400 = $2,500
Total loss = $800

Net capital gain = Total gain - Total loss = $2,500 - $800 = $1,700

Now, for ordinary income: 
The office equipment had a zero adjusted basis, so there is no gain or loss to report as ordinary income.

The automobile was sold for $1,200, which is $800 less than its purchase price, resulting in an ordinary loss of $800.

The ABC stock was sold for $3,200, which is $1,400 more than its purchase price, resulting in an ordinary gain of $1,400.

Net ordinary income = Ordinary gain - Ordinary loss = $1,400 - $800 = $600

Therefore, the correct answer is C.

The Following Assets in Jack's Business Were Sold in 2015