O'Brien purchased two automobiles for personal use.
O'Brien purchased two automobiles for personal use. Automobile 1 had an adjusted basis of $20,000, and automobile 2 had an adjusted basis of $10,000 . O'Brien sold automobile 1 for $15,000 and automobile 2 for $15,000. What gain or loss should O'Brien recognize on the sales of the automobiles?
Automobile 1, loss of $0; automobile 2 , gain of 50 .
Automobile 1, loss of $5,000 ; automobile 2, gain of $5,000
Automobile 1 , loss of $0 ; automobile 2, gain of $5,000 .
Automobile 1, loss of $5,000 ; automobile 2 , gain of $0.
Homework Answers
Adjusted basis of automobile 1 = $20,000
Adjusted basis of automobile 2 = $10,000
Sale price of automobile 1 = $15,000
Sale price of automobile 2 = $15,000
Loss on sale of automobile 1 = Sale price of automobile 1 - Adjusted basis of automobile 1
= 15,000 - 20,000
= $5,000
Gain on sale of automobile 2 = Sale price of automobile 2 - Adjusted basis of automobile 2
= 15,000 - 10,000
= $5,000
Second option is the correct option.
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