Ashburn reported a $105,000 net §1231 gain in year 6. Assuming Ashburn reported $60,000 of nonrecaptured §1231 losses during years 1-5, what amount of Ashburn's net §1231 gain for year 6, if any, is treated as ordinary income?
A) $0.
B) $45,000.
C) $60,000.
D) $105,000.
E) None of the choices are correct.

Question

Quizplus · Accepted Answer

The §1231 look-back rule recharacterizes $60,000 of the §1231 gain to ordinary income, the amount of the prior 5 year losses that received ordinary loss treatment.

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