On March 3,2013,Craig Bought a Business-Use Vehicle for $20,000

question 105

Multiple Choice

On March 3,2013,Craig bought a business-use vehicle for $20,000.He used the vehicle for three years and properly deducted a total of $12,000 as depreciation expense during this period.At the end of 2016,Craig sells the vehicle for $7,500.Why is Craig's deductible loss $500?
I.Craig has already recovered $12,000 of his investment through the depreciation deduction.
II.The adjusted basis of the vehicle was $12,000 at the date of sale.
III.$7,500 of the adjusted basis was recovered because of the sale.
IV.The realized loss is recognized because it was incurred with business-use property.
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• A)Statements I and III are correct.
• B)Statements I, III and IV are correct.
• C)Statements II and III are correct.
• D)Only statement IV is correct.
• E)Statements I, II, III, and IV are correct.

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Definitions:

Bona Fide Occupational Qualification

A work requirement that is necessary for the normal operation of a particular business or enterprise, allowing discrimination in hiring under specific circumstances.

Seniority System

A system within organizations where the length of service or tenure of employees affects decisions on promotions, layoffs, and other job-related matters.

Ability Test

An assessment designed to measure an individual's capacity to perform specific tasks or skills.

Americans with Disabilities Act

A U.S. law that prohibits discrimination against individuals with disabilities in all areas of public life, including jobs, schools, and all public and private places that are open to the general public.