What is the capital gain Sophia should report after selling her painting?

To determine the capital gain that Sophia should report after selling her painting, it's essential to understand how capital gains are calculated. Capital gain is primarily the difference between the selling price of the asset and its purchase price (known as the basis).

If Sophia sold her painting for a certain amount, that is considered her selling price. Assuming we know both her selling price and the original amount she paid for the painting (the basis), the capital gain can be derived by subtracting the basis from the selling price.

If the correct amount reported as the capital gain is $80, this likely means that after selling the painting for that amount, her purchase price was $20. The calculation would look like this: Selling Price ($100) - Purchase Price ($20) = Capital Gain ($80).

This understanding highlights the importance of accurate records of both the purchase price and the selling price to correctly compute capital gains for tax reporting. In this case, reporting a capital gain of $80 aligns with the calculation derived from those two figures.