R Realized a Gain of $10,000 on a Fire That

question 32

Multiple Choice

R realized a gain of $10,000 on a fire that destroyed part of a warehouse.R also sold several assets during the current taxable year as follows: Business use equipment held three years $ 3,000 gain
Investment land held 15 years 12,000 gain
Travel trailer used for personal trips 4,000 loss
The depreciation allowed on the equipment was $6,500 and was calculated using the straight line method.Assuming R's taxable income is $70,000 before these transactions, what is his taxable income for the year (assuming these items do not affect any other deductions) ?

• A)$95,000, $25,000 of which is long-term capital gain
• B)$91,000, $ 18,000 of which is long-term capital gain
• C)$95,000, $22,000 of which is long-term capital gain
• D)$95,000, $12,000 of which is long-term capital gain

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Definitions:

Positively Correlated

A relationship between two variables where they move in the same direction, meaning that as one variable increases, the other variable also increases, and vice versa.

Complete Information

A scenario in which all parties have access to all relevant information related to a transaction or decision.

Real Rate of Return

The real rate of return is the annual percentage profit earned on an investment, adjusted for changes in the price level due to inflation or deflation.

Nominal Return

The return on an investment without adjusting for inflation, representing the raw earnings or loss.