Which of the following represents a situation where a taxpayer can report a capital gain?

A situation where a taxpayer can report a capital gain is when the sale of the asset exceeds the original purchase price. This occurs because a capital gain is specifically defined as the increase in value of an asset from the time it was purchased until it is sold. The gain is calculated by taking the difference between the selling price and the original purchase price. If the selling price is higher, that difference is realized as a capital gain, which is reportable on the taxpayer's income tax return.

In the case of inherited assets, the cost basis is adjusted to the fair market value at the date of the decedent's death, which can affect the calculation of gains or losses. If the asset was canceled through bankruptcy, typically, any gain or loss on that asset may not be reportable as a capital gain. Similarly, when an asset is given to a charity, the taxpayer may not report a capital gain; instead, they might receive a deduction for the charity's fair market value. Thus, the best representation of a scenario involving a reportable capital gain aligns with the first choice regarding the sale exceeding the purchase price.