William is a member of an LLC. His Schedule K-1 reported a $1,200 share of capital loss and a $3,000 share of Section 1231 gain. William recognized a $4,500 capital gain on the sale of marketable securities and a $15,000 Section 1231 loss on the sale of business equipment. What is the net effect of these gains and losses on William's taxable income?

Question

Quizplus · Accepted Answer

To calculate the net effect on William's taxable income, we combine his personal gains and losses with those reported on Schedule K-1. For capital gains and losses: William's personal capital gain of $4,500 minus his share of capital loss from the LLC of $1,200 equals a net capital gain of $3,300. For Section 1231 gains and losses: William's personal Section 1231 loss of $15,000 plus his share of Section 1231 gain from the LLC of $3,000 equals a net Section 1231 loss of $12,000.

William Is a Member of an LLC