Sara owns an automobile for personal use. The adjusted basis is $13,500 and the FMV is $10,500. Sara has owned the car for two years.a. Calculate the realized gain (loss) if Sara sells the vehicle for $12,500. b. Calculate the recognized gain (loss) if Sara sells the vehicle for $12,500. c. Calculate the realized gain (loss) if Sara sells the vehicle for $15,000. d. Calculate the recognized gain (loss) if Sara sells the vehicle for $15,000.
What will be an ideal response?
a. ($1,000)
b. $0
c. $1,500
d. $1,500
a. The realized gain is the difference between the sales price - basis = $12,500 - $13,500 = ($1,000).
b. Personal losses are not recognized for tax purposes.
c. The realized gain is the difference between the sales price - basis = $15,000 - $13,500 = $1,500.
d. The recognized gain is $1,500. All gains from the sale of personal property are recognized for tax purposes.
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