Yelenis,whose tax rate is 28%,sells one Sec.1231 asset this year,resulting in a $50,000 gain.Included in the $50,000 Sec.1231 gain is $30,000 of unrecaptured Sec.1250 gain.A review of Yelenis tax files for the past five years indicates one prior Sec.1231 sale which resulted in a $14,000 loss.The gain will be taxed as

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Since Yelenis has a prior Sec.1231 loss, the gain from the current sale can be used to offset the prior loss, resulting in a net Sec.1231 gain of $36,000 ($50,000 gain minus $14,000 loss). Of this amount, $30,000 is unrecaptured Sec.1250 gain, which will be taxed at a maximum rate of 25%. The remaining $6,000 will be treated as long-term capital gain and taxed at a rate of 15%, resulting in a total tax liability of $8,700 [$30,000 x 25% + $6,000 x 15%]. Therefore, the answer is B.

Yelenis,whose Tax Rate Is 28%,sells One Sec