Bobsy Company has a $14,000 net Section 1231 gain for the current tax year from its only property transaction.In the previous year, it had a $7,000 net Section 1231 loss.For the current year, the net Section 1231 gain will be taxed as:
A)A $14,000 ordinary income
B)A $14,000 capital income
C)A $7,000 ordinary income and a $7,000 long-term capital gain
D)A $7,000 ordinary income and a $7,000 short-term capital gain

Question

Quizplus · Accepted Answer

The $14,000 net Section 1231 gain for the current year is offset by the $7,000 net Section 1231 loss from the previous year, resulting in $7,000 being treated as ordinary income. The remaining $7,000 is treated as a long-term capital gain, as Section 1231 gains are treated as long-term if the assets involved were held for more than one year.

Bobsy Company Has a $14,000 Net Section 1231 Gain for the Current