The Following Assets in Jack's Business Were Sold in 2018

question 7

Multiple Choice

The following assets in Jack's business were sold in 2018: $$\begin{array} { l l l } \text { Asset } & \underline { \text { Holding Period } } & \underline { \text { Gain/(Loss) } } \\\text { Office equipment } & 6 \text { years } & \$ 1,100 \\\text { Automobile } & 8 \text { months } & ( \$ 800 ) \\\text { ABC stock (capital asset) } & 2 \text { years } & \$ 1,400\end{array}$$ 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 2018 (the year of sale) , Jack should report what amount of net capital gain and net ordinary income?

• A)$1,700 LTCG.
• B)$600 LTCG and $300 ordinary gain.
• C)$1,400 LTCG and $300 ordinary gain.
• D)$2,500 LTCG and $800 ordinary loss.
• E)None of these.

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Definitions:

Investment

Investment refers to the action of allocating resources, usually money, with the expectation of generating an income or profit.

Compounded Quarterly

A repetitive method of calculating interest where the interest is calculated and added to the principal every three months, leading to an increase in the amount of interest earned over time.

Regular Investment

An investment strategy involving the consistent investment of a fixed amount of money at regular intervals, regardless of market conditions.

Accumulate

To gather or collect over a period of time, often referring to interest, investments, or assets.