Mark owns an unincorporated business and has $20,000 of Sec.1231 gains and $22,000 of Sec.1231 losses.He must report a net capital loss of $2,000 on his tax return.

Question

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Since the Sec.1231 losses exceed the Sec.1231 gains by $2,000, Mark will report a net Sec.1231 loss of $2,000 which can offset ordinary income up to $3,000. If there is still a remaining net loss after offsetting ordinary income, it becomes a capital loss which can be carried forward to future years. Therefore, Mark may still have a capital loss to report on his tax return, but not necessarily a net capital loss of $2,000.

Mark Owns an Unincorporated Business and Has $20,000 of Sec