[mitchmatch]

can someone explain to me why this isnt a capital loss?

Tom Lewis, an individual taxpayer, sold his personal automobile (never used for business purposes) for $5,000 in 2015. He purchased the automobile five years earlier for $10,000. Which of the following is the correct treatment of this transaction on Tom’s 2015 tax return (assuming that Tom’s only other source of income in 2015 was from wages)?

A.

Include $5,000 as miscellaneous income on his tax return.

B.

Deduct a $5,000 long-term capital loss on his tax return.

Incorrect C.

Deduct a $3,000 long-term capital loss on his 2015 tax return, and carry over the remaining $2,000 to the next year.

D.

Show neither income nor loss from this transaction on his tax return.

Correct answer is D

i thought it was a capital loss, isnt a personal car a capital asset?? furthermore the irs states

The following items are examples of capital assets.

Stocks and bonds.

A home owned and occupied by you and your family.

Timber grown on your home property or investment property, even if you make casual sales of the timber.

Household furnishings.

A car used for pleasure or commuting!!!!!

what am i doing wrong?

FAR-76 First attempt.
AUD-79 First attempt.
REG-79 First attempt.
BEC-79 First attempt.

Done!

BECKERS

[taxgeek83]

Losses on the sale of personal items are nondeductible. Gains on the sale of personal items are taxable at the applicable cap gains tax rate.

Hope that helps. 🙂

[mitchmatch]

So when can you deduct 3000 capital losses? In this question, is their a 2000 gain because he can only offset 3000 of capital losses or is their no gain at all?

FAR-76 First attempt.
AUD-79 First attempt.
REG-79 First attempt.
BEC-79 First attempt.

Done!

BECKERS

[Missy]

Losses from the sale of personal use items are never deductible https://www.irs.gov/taxtopics/tc409.html

There is no gain because his basis is the purchase price 10k. If he sold for more than 10k there would be a gain but since it was sold for 5k it's an entirely nondeductible loss

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[EuroAddict]

For individual tax return, a 1040, capital losses are investments in stock (long term and short term).

-----------------------------
BEC - 77, 03/2015 (first try)
FAR - 79, 05/2015 (second try)
REG - 83, 12/2015 (first try)
AUD - 84, 03/2015 (first try)

I got 99 problems but the CPA ain't one.

[taxgeek83]

Losses from the sale of investment and business assets are deductible (subject to limitations). In the problem above, the taxpayer netted -$5,000. The loss is not deductible because it is a personal loss. There is no gain either – the transaction is essentially disregarded for income tax purposes.

Does that help?

[leglock]

aren't business assets 1231 assets and not capital assets?

[taxgeek83]

@leglock – Yep, but the gain on 1231 assets is generally treated as a long term capital gain, and the whole thread started as a capital gain/loss issue, so I threw it in there. If that makes sense?

[Author]

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