An elderly father owns a classic car that was purchased many years ago for $7,500. The father dies and bequeaths the car to his son. At the date that the car was bequeathed to the son, the car was valued at $20,000. A few years later, the son sells the car for $22,500. What is the tax consequence to the son

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

$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

disadvantages of leasing a vehicle: no vehicle equity and mileage limitations

disadvantages of purchasing a vehicle: large down payment and vehicle depreciation

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