The following assets in Jack's business were sold in 2018:
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 2018 (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 2018: 
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 2018 (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

- Office equipment with zero adjusted basis sold for $8,000 results in a $8,000 gain, which is taxed as ordinary income.
- Automobile with an adjusted basis of $2,000 sold for $1,200, results in a $800 loss, which is a capital loss.
- ABC stock with an adjusted basis of $1,800 sold for $3,200, results in a $1,400 gain, which is a long-term capital gain.
- Therefore, the net capital gain is $1,400 - $800 = $600 LTCG.
- The net ordinary income is the gain from selling office equipment, which is $8,000, and thus $300 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 2018