Recognized Gain or Loss on the Sale of a Classic Car
What is Julia’s recognized gain or loss on the sale of the car?
The recognized gain or loss on the sale of the car depends on the selling price and the adjusted basis. Julia's recognized gain increases as the selling price exceeds the adjusted basis, while she would have a recognized loss if the selling price is below the adjusted basis.
What if Julia sold the car for $13,000?
To determine Julia's recognized gain or loss on the sale of the car, we need to consider the adjusted basis and the selling price. Using the same adjusted basis of $10,000, Julia's recognized gain or loss is calculated as the selling price ($13,000) minus the adjusted basis ($10,000).
What if Julia sold it for $16,000?
Once again, using the adjusted basis of $10,000, Julia's recognized gain or loss is calculated as the selling price ($16,000) minus the adjusted basis ($10,000).
Julia's recognized gain or loss on the sale of the car:
Sale for $30,000:
Julia's adjusted basis for the car is $10,000. Therefore, recognized gain = $30,000 - $10,000 = $20,000.
Sale for $13,000:
Recognized gain = $13,000 - $10,000 = $3,000.
Sale for $16,000:
Recognized gain = $16,000 - $10,000 = $6,000.
When Julia sold the classic car for $30,000, her recognized gain was $20,000. This means she profited by $20,000 from the sale after considering the adjusted basis.
If Julia had sold the car for $13,000, her recognized gain would have been $3,000. In this scenario, Julia still made a gain of $3,000 from the sale.
Lastly, if Julia had sold the car for $16,000, her recognized gain would have been $6,000. This would have resulted in a $6,000 gain for Julia.
In summary, the recognized gain or loss on the sale of the car is determined by the selling price and the adjusted basis. Julia's recognized gain increases as the selling price exceeds the adjusted basis, while she would experience a recognized loss if the selling price is lower than the adjusted basis.