Question

Olivia wants to buy some vacant land for investment purposes. She cannot afford the full purchase price. Instead, Olivia pays the landowner $14,500 to obtain an option to buy the land for $290,000 anytime in the next four years. Fourteen months after purchasing the option, Olivia sells the option for $18,125. What is the amount and character of Olivia's gain or loss?

Answer 1

$3,625

Step-by-step explanation:

Missing word "She has a long-term capital gain of $..................."

Long term capital gain = Sale price of option - Buying price of option

Long term capital gain = $18,125 - $14,500

Long term capital gain = $3,625

So, the amount and character of Olivia's long-term capital gain is $3,625.