Accounting Jokes

The definitive site for humour about all things accounting

Pumpkins

The accountant had just read the story of Cinderella to his four-year-old daughter for the first time. The little girl was fascinated by the story, especially the part where the pumpkin turns into a golden coach. Suddenly she piped up, “Daddy, when the pumpkin turned into a golden coach, would that be classed as income or a long-term capital gain?”

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One response to “Pumpkins

  1. Abdu 23 August 2012 at 7:16 am

    It depends. Because cinderella wasn’t running a business according to what we know of the fairy tale, we can safely assume it to be a Capital Asset in her hands. Having said that, it would be incorrect to say that she would experience a capital gain for certain.
    Depending on how long cinderella’s holding period is, she could either experience a short-term capital gain (which would basically be taxed at the ordinary income rate) OR she could she could experience a LTCG. But either way, the only time she would actually recognize the Gain/Income would be entirely contingent on whether she would opt to dispose off the asset.
    Which makes me wonder… about her tax deductions, should she choose to sell it.
    But then again, its better to gift the appreciated property since she wouldn’t want to recognize the Income/CG and avoid the tax altogether.

    Once thing’s for certain, this fairy tale represents some very complex tax issues.

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