In 2013, Harold Purchased a Classic Car That He Planned

question 11

Multiple Choice

In 2013, Harold purchased a classic car that he planned to restore for $12,000. However, Harold is too busy to work on the car and he gives it to his daughter Julia in 2017. At this time, the fair market value of the car has declined to $10,000. Harold paid no gift tax on the transaction. Julia completes some of the restoration herself with out-of-pocket costs of $5,000. She later sells the car for $30,000. What is Julia's recognized gain or loss on the sale of the car?

• A)$0
• B)$13,000
• C)$15,000
• D)$18,000
• E)None of the above

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Definitions:

Statement of Stockholder's Equity

A financial statement that shows the changes in the value of a company's equity over a reporting period.

Balance Sheet

A detailed statement reflecting a company's tangible assets, owed liabilities, and shareholder equity at a particular time.

Income Statement

A financial statement that shows a company's revenue and expenses over a specific period, usually a fiscal quarter or year.

Statement of Cash Flows

A financial report that offers comprehensive details on all cash receipts and expenditures a company incurs from its operational activities and external funding sources.