Question

Problem 3-50 (a) (LO. 6, 8)

During the year, Shanta recorded the following transactions involving capital assets.

Indicate the tax treatment for each item:

Transaction Amount Tax Treatment Loss on the sale of a coin collection (held as an investment for 10 years) ($15,000) Gain on the sale of a personal vehicle (purchased six months ago) 1,000 Gain on the sale of corporate stock (purchased two years ago as an investment) 11,000 Loss on the sale of a personal sail boat (acquired three years ago) (3,200)

Overall, Shanta has of $ and of $.

Answer 1

Defination of capital asset as per law: A capital asset held by an individual taxpayer includes assets held for investment purposes and for personal (rather than business) purposes

Loss on the sale of a coin collection (held as an investment for 10 years):

$15,000 long-term capital loss. It is considered long term due to the holding period of 10 years.

Gain on the sale of a personal vehicle (purchased six months ago)

$1,000 short-term capital gain. It is considered short term due to the holding period of six months.

Gain on the sale of corporate stock (purchased two years ago as an investment)

$11,000 long-term capital gain. It is considered Long term due to the holding period of two years.

Loss on the sale of a personal sail boat (acquired three years ago)

$ 0, not deductible. Losses realized from the disposition of personal use property (property neither held for investment nor used in a trade or business) are not recognized.

Overall, Shanta has Long term capital loss of $ 4000 and short term capital gain of $1000.