Part 1 Advising the Individual Taxpayer question: Gail sold

Part 1Advising the Individual Taxpayer

Gail sold her personal car in 2025 for $6,000 less than she paid for it. How is the loss treated?

A As a capital loss of up to $3,000
B As a casualty loss on Schedule A
C It is not deductible
D As an ordinary loss on Schedule 1

Show the answer and explanation

Answer: C. It is not deductible

A car used only for personal purposes is a capital asset, but a loss on the sale of personal-use property is not deductible. A gain on such a sale would be taxable capital gain. Only losses on investment or business property, or casualty losses in disaster areas, are deductible. Source: IRC 165(c); Pub. 544 (2025), Personal-use property. Tax year: 2025 (law as of 31 Dec 2025).

Common mistake

Deducting a loss on personal-use property as a capital loss.

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A married couple's itemized deductions each year are about $30,000, just under their standard deduction. Which strategy may lower their total tax over two years?Ruth, 85, owns stock that cost $20,000 and is now worth $200,000. Her son will sell it soon after he receives it. To minimize his income tax on the sale, she should Dana is single and pays all the costs of her own home. Her widowed mother lives all year in a nursing home, and Dana pays more than half of that cost. Her mother's only income is $4,100 of interest. What is Dana's best 2025 filing status?

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Original study material mapped to the public IRS SEE content outlines; not a real exam question.Not affiliated with or endorsed by the IRS or PSI. Verify figures and rules against current guidance before relying on them.