Dana purchases an automobile for personal use for $27,000. After using it for three years, Dana converts the automobile to business use when the fair market value is $19,000. After a few months of business use, Dana sells the automobile for $18,000. What is the amount of gain or loss recognized on the sale of the automobile?
A)No gain or loss
B)$1,000 loss
C)$8,000 loss
D)$9,000 loss
E)$8,000 gain

Question

Quizplus · Accepted Answer

The recognized loss is $1,000, calculated as the difference between the fair market value at the time of conversion to business use ($19,000) and the sale price ($18,000). The loss is recognized because the sale price is less than the value at the time of conversion to business use, not the original purchase price.

Dana Purchases an Automobile for Personal Use for $27,000