In 2018, Thomas, a single taxpayer who has a marginal tax rate of 10%, sells land that is Sec. 1231 property at a gain of $4,000. If he has no other 1231 transactions or capital asset transactions and has no nonrecaptured 1231 gain, Thomas will pay no tax on the $4,000 gain.

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Sec. 1231 gains are taxed at a maximum rate of 25%. However, if the taxpayer has no other 1231 transactions or capital asset transactions and has no nonrecaptured 1231 gain, then the Sec. 1231 gain is taxed at the taxpayer's ordinary income tax rate. In this case, Thomas's marginal tax rate is 10%, so he will pay no tax on the $4,000 gain.

In 2018, Thomas, a Single Taxpayer Who Has a Marginal