Spencer has an investment in two parcels of vacant land.Parcel 1 is a capital asset and parcel 2 is a § 1231 asset. Spencer already has a short-term capital loss for the year that he would like to offset with capital gain.He has a §
1231 lookback loss that exceeds the gain from the disposition of either land parcel.Spencer wants to sell only one land parcel: each of them would yield the same amount of gain.The gain that would be recognized exceeds the short-term capital loss Spencer already has.Which of the following statements is correct?
A)Spencer will have a net capital loss no matter which land parcel he sells.
B)Spencer will have a net capital loss if he sells parcel 2.
C)Spencer will have a net capital loss if he sells parcel 1.
D)Spencer will have a net capital gain if he sells either parcel 1 or parcel 2.
E)None of these.

Question

Quizplus · Accepted Answer

If Spencer sells parcel 2, the gain will be treated as ordinary income due to the § 1231 lookback rule, which means it won't offset the short-term capital loss, resulting in a net capital loss.

Spencer Has an Investment in Two Parcels of Vacant Land