Nancy Owns a Truck She Uses Personally

question 21

Multiple Choice

Nancy owns a truck she uses personally. It cost her $18,000 two years ago. Doug offers Nancy $19,000 for the truck. What would be the tax effects if the transaction is completed this year?
I.Nancy will realize a capital gain of $1,000 due to the capital recovery concept.
II.Nancy must recognize income of $19,000 due to the all-inclusive-income concept.
III.Nancy must recognize a capital gain of $1,000 on her current-year tax return because there is no legislative provision to exclude this gain.
IV.Nancy will recognize no gain on her tax return due to lack of business purpose with the automobile.
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• A)Statements I and IV are correct.
• B)Statements I, II, and III are correct.
• C)Statements I and III are correct.
• D)Statements II and IV are correct.
• E)Only statement IV is correct.