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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$14,000 of the gain will be recharacterized as ordinary income due to the five-year lookback rule. The recharacterization is first applied to the net Sec. 1231 gain in the 25% group (unrecaptured Sec. 1250 gain).

Yelenis, Whose Tax Rate Is 28%, Sells One Sec