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Operation CPA
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| Posted: 08 Jan 2010 at 21:08 | IP Logged
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Hi all,
I am confused about the following question from the Wiley 2009 book pg. 508 (#43):
On July 1, 2008, Kim Wald sold an antique for $12,000 that she bought for her personal use in 2006 at a cost of $15,000. In her 2008 return, Kim should treat the sale of the antique as a transaction resulting in...
A. A nondeductible loss.
B. Ordinary loss.
C. Short-term capital loss.
D. Long-term capital loss.
The answer in the book is A. Why is this? I thought that the antique is a capital asset (it is not mentioned in the list of items that are NOT capital assets), and therefore would produce a long-term capital gain in this case. Please help. Thanks in advance...
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kj_nyc
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| Posted: 08 Jan 2010 at 23:20 | IP Logged
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The problem says she bought for her personal use, so it is a personal asset, not capital asset. If it had been bought for investment, it would have been capital asset. Losses on personal use assets are nondeductible.
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cpa0123
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| Posted: 08 Jan 2010 at 23:55 | IP Logged
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Operation CPA wrote:
The answer in the book is A. Why is this? I thought that the antique is a capital asset (it is not mentioned in the list of items that are NOT capital assets), and therefore would produce a long-term capital gain in this case. Please help. Thanks in advance...
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Since you mentioned 'gain', long term capital gain on sale of antiques is taxable at 28%. Loss is not deductible because it is used for personal purposes.
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Operation CPA
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| Posted: 09 Jan 2010 at 03:00 | IP Logged
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Thank you both for your timely responses! I appreciate your help.
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SDJack
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| Posted: 10 Jan 2010 at 21:12 | IP Logged
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Personal property such as the antique are capital assets and so are investments; those being the two categories of capital assets for individual taxpayers. For personal capital assets only gains are recognized for tax purposes whereas both gains/losses can be recognized for investments.
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Topic: Please help - EXAM TOMORROW...
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