In: Accounting

# Long term capital gain

Jayne purchased General Motors stock 6 years ago for $20,000. In 2016, she sells the stock for$35,000. What is Jayne’s gain or loss?

a. $15,000 short-term gain b.$15,000 long-term gain

c. $15,000 ordinary loss d.$15,000 extraordinary gain

e. No gain or loss is recognized on this transaction

## Solutions

##### Expert Solution

Capital Gain :

If the selling price of the capital asset is higher than the purchase price then Capital Gains arises. It is further divided into two types based on the holding period of Asset.

1. Long term capital gain                   2. Short term capital gain

Long term Capital gain :

when the Capital asset owned for more than one year is sold then the gain arising from them is termed as long term capital gain.

Short term capital gain:

When the capital asset owned for less than a year is sold then the gain arising from them is termed as short term capital gain.

Purchase price = $20,000 Selling price =$35,000

Gain = Selling price - Purchase price

= $35,000 -$20,000

= $15,000. As the asset is owned for more than a year i.e., 6 Years ,The gain arised on that is Long term Capital Gain. therefore ,a)$15,000 Long term Gain is the correct option .

a) \$15,000 Long term Gain .