Tracy owns a nondepreciable capital asset held for investment. The asset was pur

Question

Tracy owns a nondepreciable capital asset held for investment. The asset was purchased for $250,000 six years earlier and is now subject to a $75,000 liability. During the current year, Tracy transfers the asset Tim in exchange for $94,000 cash and a new automobile with a $50,000 fair market value (FMV) to be used by Tracy for personal use; Tim assumes the $75,000 liability. a. Determine the amount of Tracy's long-term capital gain (LTCG) or long-term capital loss (LTCL). b. show your calculation, labeling each line item.

Explanation / Answer

Tracy gave up an asset that had a basis to her of 250,000. She received: 94,000 cash, 50,000 automobile, and 75,000 liability relief for a total of 219,000. Her loss is 219,000 - 250,000 = 31,000 LTCL.

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