Pierce has a $16,000 Section 1231 loss,a $12,000 Section 1231 gain,and a salary of $50,000.What is the treatment of these items in Pierce's AGI?
A)Pierce has a LTCG of $12,000 and a net ordinary income of $34,000.
B)The 1231 gains and losses are treated as ordinary gains and losses making Pierce's AGI for the year $46,000.
C)Pierce has a $3,000 LTCL which is deductible for AGI making AGI $47,000.He also has a $1,000 LTCL carryover.
D)Pierce has net LTCG of $9,000 and $37,000 of net ordinary income.

Question

Quizplus · Accepted Answer

Section 1231 gains and losses are treated as ordinary gains and losses, so Pierce's Section 1231 loss and gain offset each other to result in $0. Pierce's AGI would be his salary of $50,000 plus $0 from Section 1231 gains and losses, for a total AGI of $50,000. None of the other choices accurately reflect Pierce's situation. Choice A incorrectly assumes that Pierce has a net long-term capital gain, and choice C incorrectly assumes that Pierce has a long-term capital loss carryover. Choice D incorrectly assumes that Pierce has a net long-term capital gain and a high amount of net ordinary income.

Pierce Has a $16,000 Section 1231 Loss,a $12,000 Section 1231