Final answer:
Losses on personal-use property like Inez's car are generally not deductible for income tax purposes because the tax code does not allow recognizing a loss on the sale of personal-use property.
Step-by-step explanation:
The question concerns taxation and specifically the deductibility of losses from personal property, which is a business or accounting concept. To answer whether Inez can recognize the loss for tax purposes: Generally, losses on the sale of personal-use property, such as a car Inez owns for personal use, are not deductible for federal income tax purposes. The Internal Revenue Code specifies that losses from the sale of personal property are not recognized, which means Inez cannot claim a loss on her car that has an adjusted basis of $40,000 and a current fair market value of $24,000. This is the general rule for most individual taxpayers with personal-use property.
The examples provided about Freda and Frank pertain to real estate equity which is different from taxes on personal-use property as real estate can be investment property where gains and losses can have tax implications. Inez's situation differs as automobiles are typically not considered investment properties like real estate. However, if the car had been used for business purposes, the situation could be different, and a loss might potentially be deductible according to the specific business use of the car.