The available options are:
A. No capital gain or loss because the item sold was personal property
B. $2,500 long term capital gain
C. $12,500 long term capital gain
D. $22,500 long term capital gain
Answer:
$2,500 long term capital gain
Explanation:
Given that the classic car, that is an item under consideration is inherited, therefore, the cost basis to the recipient is the market value at the date of death.
Hence, the market value of the date of death is $20,000
The amount the classic car is sold is $22,500
To get the capital gain or loss, subtract the value at the date of death from the amount sold, which is $22,500 - $20,000 = $2,500
Hence, the correct answer is $2,500 long term capital gain
