Vertical, Inc., has a 2014 net § 1231 gain of $67,000 and had a $22,000 net § 1231 loss in 2013. For 2014, Vertical's net § 1231 gain is treated as:

Question

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Net § 1231 gains are first classified as either long-term or short-term capital gains. Since Vertical had a net § 1231 loss in 2013, the remaining net § 1231 gain in 2014 is classified as long-term capital gain. Therefore, $45,000 of the net § 1231 gain is treated as long-term capital gain and the remaining $22,000 is treated as ordinary gain.