Ashburn reported a $105,000 net §1231 gain in Year 6. Assuming Ashburn reported $60,000 of nonrecaptured §1231 losses during Years 1 to 5, what amount of Ashburn's net §1231 gain for Year 6, if any, is treated as ordinary income?

Question

Quizplus · Accepted Answer

$60,000 of Ashburn's net §1231 gain for Year 6 is treated as ordinary income due to the nonrecaptured §1231 losses of $60,000 from Years 1 to 5. This rule ensures that past §1231 losses, which were likely treated as ordinary losses, offset future §1231 gains to the extent of those losses, treating them as ordinary income.

Ashburn Reported a $105,000 Net §1231 Gain in Year 6