Sale of personal assets

Question 1

Sale of automobile

Tax gain (loss) recognized and holding period

Answer 1

On April 2, Year 2, I sold a used automobile for $10,000 to one of my colleagues. I originally purchased the automobile on January 15, Year 1, for $500. The purchase price was low because the engine was not functional, and the automobile would not start. I spent 80 hours replacing the engine. The new engine cost $3,000, and the estimated value of my labor to replace the engine was $700. The automobile was fully operational and ready for sale on March 1, Year 2.

We deduct cost of any repairs/parts, amount received when sold , but we cannot deduct labor

A: $10,000 - $3000 - $500 = $6,500 - Long term

Question 2

Sale of Lilac Corp. stock
Tax gain (loss) recognized and holding period

• A wash sale is only when there is a lost - SH not allow to use the lost if it sold and repurchase stocks within a year
• Also it does not apply for lost of different companies/stocks

Answer 2

On January 3, Year 1, I purchased 50 shares of Lilac Corp. common stock, at a cost of $50 per share. On January 15, Year 2, Lilac announced a 2-for-1 stock split. On May 2, Year 2, I sold 100 shares of Lilac for $10,000. On May 9, Year 2, I used the proceeds from the sale of this stock to repurchase 100 shares of Lilac stock for $9,000.

A - Bought:
50 stocks x $50 = $2500

B - 2-for-1 stock split.
50 stocks x $25 = $2500
(remember everytime there is a 2-1 split my stock price goes down to half

C - Sold stocks for $10k
$10,000 - $2500 = $7500
LTCG