When Lindsey sold the necklace for $1,200, what type of gain did she realize based on the original purchase price and appraised value?

To determine the type of gain Lindsey realized from the sale of the necklace, it's important to understand how capital gains are classified. The gain is calculated by taking the sale price and subtracting the basis, which is typically the original purchase price of the item.

In this scenario, if the original purchase price of the necklace was significantly lower than the selling price of $1,200, the difference represents the gain. If the original purchase price was, for instance, $100, then the gain realized would be $1,200 - $100 = $1,100.

This gain can be classified as a long-term capital gain, provided that Lindsey held the necklace for more than a year before selling it. Long-term capital gains are taxed at a reduced rate compared to ordinary income. The favorable tax treatment is designed to encourage long-term investment. Given that the question indicates that the correct answer is a long-term capital gain, it supports the assumption that Lindsey did indeed hold the necklace longer than one year, allowing the gain to fall into the long-term category.

In contrast, an ordinary gain typically applies to items held for shorter periods or to inventory sales, which do not seem relevant to this situation involving a personal item like a necklace. Therefore, the classification