A business taxpayer sells inventory for $80,000. The adjusted basis of the property is $58,000 at the time of the sale and the inventory had been held more than one year. The taxpayer has:
A) No gain or loss.
B) Sold a long-term capital asset.
C) Sold a short-term capital asset.
D) An ordinary gain.
E) None of the above.

Question

Quizplus · Accepted Answer

Since the inventory was held for one year or less, it would be considered a short-term capital asset if it had been sold at a gain. However, since it has been sold at a gain and is inventory related to the taxpayer's trade or business, it is classified as ordinary income and not taxed as a capital gain. Therefore, the taxpayer has an ordinary gain.

A Business Taxpayer Sells Inventory for $80,000