Question

The following assets in Jack’s business were sold in 2020: Asset Holding Period Gain/(Loss) Office equipment 6 years $1,100 Automobile 8 months ($ 800) ABC stock (capital asset) 2 years $1,400 ​ Office equipment, purchased for $8,000, had a zero adjusted basis. 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 2020 (the year of sale), Jack should report what amount of net capital gain and net ordinary income?

Answer 1

Net capital gain = $1,400

Net ordinary income = $300

Step-by-step explanation:

Long term Capital gain = $1,400 from sale of stock since it was hold for 2 years (more than 1 year)

Ordinary gain = $1,100 - $800 = $300 since automobile was 6 months old and equipment had zero basis