An individual has the following recognized gains and losses from disposition of § 1231 assets (all were vacant land): $15,000 gain, $10,000 loss, $25,000 gain, and $2,000 loss.The individual has a $5,500 § 1231 lookback loss.The individual also has a $16,000 net short-term capital loss from the disposition of stock.Which of the following statements is correct?
A)The taxpayer has $5,500 ordinary gain and $6,500 net long-term capital gain.
B)The taxpayer has $12,000 net long-term capital gain.
C)The taxpayer has $28,000 ordinary gain and $16,000 net short-term capital loss.
D)The taxpayer has $5,500 ordinary loss and $6,500 net long-term capital gain.
E)None of these.

Question

Quizplus · Accepted Answer

The taxpayer combines the § 1231 gains and losses, resulting in a net § 1231 gain of $28,000 ($15,000 + $25,000 - $10,000 - $2,000). The $5,500 § 1231 lookback loss is treated as ordinary income, leaving $22,500 ($28,000 - $5,500) as net long-term capital gain. The $16,000 net short-term capital loss from stock disposition is separate and does not affect the § 1231 calculation. Therefore, the taxpayer has $5,500 of ordinary gain (due to the lookback loss) and $22,500 of net long-term capital gain, which is not an option, indicating a potential misunderstanding or error in the question's choices or interpretation.

An Individual Has the Following Recognized Gains and Losses from Disposition