Shen purchased corporate stock for $20,000 on April 10, 2013. On July 14, 2015,

Question

Shen purchased corporate stock for $20,000 on April 10, 2013. On July 14, 2015, when the stock was worth $12,000, Shen died and his son, Mijo, inherited the stock. Mijo sold the stock for $14,200 on November 12, 2015.

What is the amount and character of Mijo’s gain or loss?
$___________ (gain or loss)

Complete the following statements regrading the appropriate tax treatment for each sale.

1. Tobo Company buys and sells computers. Any gains from the sale of the computer are Select: (capital ordinary) gains.

2. Masahiko sells his personal computer at a $500 gain. Masahiko's gain is Selecta: (a capital or an ordinary) gain.

3. Picco Company has accounts receivable of $50,000. Because Picco needs immediate cash, it sells the receivables for $40,000 to a financial institution. If Picco is a cash basis taxpayer, it has $__________ of Select: (capital gain ordinary) income.

Explanation / Answer

Mijo will have a capital gain of $2200 since he inherited the stock for $12000 which means the purchase price will be $12000 and sale price $14200.

1. gains from sale of computer are ordinary gains as they don not qualify for $1231 gains.

2.masahiko sells his personal computer at a $500 gain it will be treated as a capital gain under section 1231. Since personal assets qualify for capital gains.

3. Selling of accounts receivable of $ 50000will be considered as ordinary income.

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