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pshichka [43]
3 years ago
9

Loc Nguyen sold his personally owned boat for $6,000. Loc is not self-employed and he did not have any outstanding loans on the

boat. He opened a savings account at his bank with the $6,000. Loc's original basis in the boat is $1,000 which is the amount that he originally paid for the boat. How should Loc classify the $5,000 gain from the sale of his boat
Business
1 answer:
lesantik [10]3 years ago
3 0

Question Completion with options:

Select one:

a. Include the $5,000 in total income on Form 1040

b. Include the $5,000 as a capital gain on Schedule D

c. Include the $5,000 as self-employment income on Schedule C

d. Include the $5,000 as interest income on Form 1040

Answer:

Loc Nguyen should:

b. Include the $5,000 as a capital gain on Schedule D.

Explanation:

Both long-term and short-term capital gains and deductible capital losses are reported on Schedule D of Form 1040.  If the gain from the sale of the boat is a long-term capital gain, it will be subject to the lower capital gain tax rate of up to 20%, unlike the short-term capital gain that attracts a rate of up to 37%.

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