Noelle owns an automobile which she uses for personal use. Her adjusted basis is $45,000 (i.e., the original cost). The car is worth $22,000. Which of the following statements is correct?
A) If Noelle sells the car for $22,000, her realized loss of $23,000 is not recognized.
B) If Noelle exchanges the car for another car worth $22,000, her realized loss of $23,000 is not recognized.
C) If the car is stolen and it is uninsured, Noelle may be able to recognize part of her realized loss of $23,000.
D) Only a. and b. are correct.
E) a., b., and c. are correct.

Question

Quizplus · Accepted Answer

If Noelle sells the car for $22,000, her realized loss of $23,000 is not recognized because personal-use property is not subject to loss recognition. If Noelle exchanges the car for another car worth $22,000, her realized loss of $23,000 is not recognized because like-kind exchanges are tax-deferred. If the car is stolen and it is uninsured, Noelle may be able to recognize part of her realized loss of $23,000 as a casualty loss.

Noelle Owns an Automobile Which She Uses for Personal Use