LO.1 Chuck and Teresa became engaged after they graduated from college in May 2012. As a graduation present, Chuck received a new car worth $29,000 from his uncle, which he uses for personal purposes. Because Teresa is employed, she purchases a car just like the one Chuck received from his uncle and uses it 60% for business.

a. Why can Teresa deduct depreciation on her car, whereas Chuck cannot?

b. If Chuck and Teresa each later sell their cars for $24,000, why is Teresa’s realized gain recognized, while Chuck’s realized loss is disallowed?