The following assets in Jack's business were sold in 2017:
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 2017 (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 2017: ​
 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 2017 (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

- The office equipment had a zero adjusted basis, so the entire amount received from the sale of $8,000 would be taxed as ordinary income.
- The automobile had a loss on sale of $800 ($2,000 purchase price - $1,200 sales price), but since it was used in the business, it is treated as an ordinary loss.
- The ABC stock had a capital gain of $1,400 ($3,200 sales price - $1,800 purchase price).
Therefore, the net capital gain is $1,400 and the net ordinary gain is $300, resulting in a total taxable gain of $1,700.

The Following Assets in Jack's Business Were Sold in 2017