Verway, Inc., has a 2012 net § 1231 gain of $55,000 and had a $62,000 net § 1231 loss in 2011.For 2012, Verway's net § 1231 gain is treated as:
A)$55,000 ordinary loss.
B)$55,000 ordinary gain.
C)$55,000 capital loss.
D)$55,000 capital gain.
E)None of the above.

Question

Quizplus · Accepted Answer

When a taxpayer has a net § 1231 gain, it is treated as long-term capital gain. Therefore, Verway's 2012 net § 1231 gain of $55,000 is treated as an ordinary gain. This is the best choice because it correctly identifies the gain as ordinary, but not as a loss or a capital loss/gain.