Question

T-3. Three years ago, Mia purchased for $25,000 an automobile that she used for grocery shopping and family outings. She sold the car for $12,000 in May 2019. Mia sold no other assets in 2019, and her gross income consisted solely of salary income shown on her Form W-2 as an employee of ABC Corporation in the amount of $40,000. What is the amount of Mia’s loss with respect to the sale of the automobile that may be used to offset her 2019 salary income?

                a.             $0

                b.             ($3,000)

c.             ($12,000)

                d.             ($13,000)

                e.             ($25,000)

Answer 1

As per publication 544 of IRS , car used for personal use are considered as capital Asset , so on sale of that assets if we generate profit its capital gain but if we generate loss from that asset , then the capital loss cannot be set off from income . capital loss can be set off only when we have causality or theft loss.

In given case mia generate capital loss by selling the car 25000-12000= $13000

As capital loss to mia is $ 13000 but it cannot be setoff from salary of Mia of $ 40000

so Mia will be deduct $0

Answer is (A) $ 0