An individual taxpayer has the following property transactions during the current year:
$$\begin{array} { l l }
\text { Personal automobile owned 3 years } & \$ 4,000 \text { loss on sale } \
\text { Business equipment owned 3 years } & \$ 5,600 \text { gain on sale } \
\text { Factoring of receivables } & \$ 6,200 \text { loss } \
\text { Common stock owned 7 months } & \$ 3,500 \text { gain on sale }
\end{array}$$
How do these transactions affect the individual's AGI?
A) AGI is increased by $2,900
B) AGI is decreased by $1,100
C) AGI is increased by $9,100
D) AGI is decreased by $2,900
E) None of the above

Question

An individual taxpayer has the following property transactions during the current year:
$$\begin{array} { l l } 
\text { Personal automobile owned 3 years } & \$ 4,000 \text { loss on sale } \
\text { Business equipment owned 3 years } & \$ 5,600 \text { gain on sale } \
\text { Factoring of receivables } & \$ 6,200 \text { loss } \
\text { Common stock owned 7 months } & \$ 3,500 \text { gain on sale }
\end{array}$$
How do these transactions affect the individual's AGI?
A) AGI is increased by $2,900
B) AGI is decreased by $1,100
C) AGI is increased by $9,100
D) AGI is decreased by $2,900
E) None of the above

Quizplus · Accepted Answer

The loss on the sale of the personal automobile is not deductible, and the loss on factoring of receivables is considered an ordinary loss and thus deductible. The gain on the sale of business equipment and common stock are both included in AGI. Therefore, AGI is increased by $5,600 (business equipment gain) + $3,500 (common stock gain) - $6,200 (factoring of receivables loss) = $2,900.

An Individual Taxpayer Has the Following Property Transactions During the Current