As part of the § 1231 netting process, casualty and theft gains and losses involving business capital assets and § 1231 assets are combined.If a net gain results, each casualty or theft is treated separately as a casualty gain or loss.

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In the § 1231 netting process, casualty and theft gains and losses involving business capital assets and § 1231 assets are indeed combined. However, if a net gain results, it is treated as long-term capital gain, not separately as casualty gains or losses.

As Part of the § 1231 Netting Process, Casualty and Theft