Irby Inc. was incorporated in 2014 and adopted a calendar year. Here is a schedule of Irby's net Section 1231 gains and (losses) reported on its tax returns through 2019. $$\begin{array} { c c c c c c }
2014 & 2015 & 2016 & 2017 & 2018 & 2015 \
\$ ( 4,500 ) & \$ ( 3,000 ) & \$ ( 7,890 ) & \$ 45,600 & \$ - 0 - & \$ 1,300
\end{array}$$ In 2020, Irby recognized a $14,750 gain on the sale of business land. How is this gain characterized on Irby's tax return?

Question

Irby Inc. was incorporated in 2014 and adopted a calendar year. Here is a schedule of Irby's net Section 1231 gains and (losses) reported on its tax returns through 2019. $$\begin{array} { c c c c c c } 
2014 & 2015 & 2016 & 2017 & 2018 & 2015 \
\$ ( 4,500 ) & \$ ( 3,000 ) & \$ ( 7,890 ) & \$ 45,600 & \$ - 0 - & \$ 1,300
\end{array}$$ In 2020, Irby recognized a $14,750 gain on the sale of business land. How is this gain characterized on Irby's tax return?

Quizplus · Accepted Answer

The $14,750 gain is characterized as a Section 1231 gain because net Section 1231 gains are treated as long-term capital gains if the gains exceed the losses for the tax year. The previous losses do not change the character of the current year's gain.

Irby Inc Was Incorporated in 2014 and Adopted a Calendar Year