The following assets in Jack's business were sold in 2012: 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 2012 (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 2012:  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 2012 (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 gain or loss on each asset is calculated separately:

- Office Equipment: Since it had a zero adjusted basis, the entire sales price of $8,000 is treated as ordinary gain.
- Automobile: The sales price is $1,200 and the adjusted basis is $2,000, resulting in a capital loss of $800.
- ABC Stock: The sales price is $3,200 and the adjusted basis is $1,800, resulting in a long-term capital gain of $1,400.

The net capital gain is the sum of all capital gains and losses, which in this case is ($1,400 - $800) = $600 LTCG. The net ordinary income is the sum of all ordinary gains and losses, which in this case is $8,000 ordinary gain.

Therefore, the correct answer is C) $1,400 LTCG and $300 ordinary gain.

The Following Assets in Jack's Business Were Sold in 2012