Question

Sophia sold a painting that she held as an investment on an online auction website for $100. She bought the painting for $20 at a garage sale years ago. Sophia should report what amount as a capital gain on her Schedule D (Form 1040)?

A. $0
B. $20
C. $80
D. $100

Answer 1

Sophia should report a capital gain of $80 on her Schedule D (Form 1040), which is the selling price of $100 minus the purchase price of $20. Option C is the correct answer.

Step-by-step explanation:

The question involves determining the capital gain from the sale of an investment, which in this case is a painting. Capital gain is calculated as the difference between the selling price and the purchase price of an investment. In Sophia's case, she sold a painting for $100 that she previously bought for $20. Therefore, her capital gain would be the selling price minus her purchase cost, which is $100 - $20 = $80.

On her Schedule D (Form 1040), used for reporting capital gains and losses, Sophia would report a capital gain of $80. This means that the correct answer to the question is option C.