During the current year,Kayla recognizes a $40,000 Sec.1231 gain on sale of land and a $22,000 Sec.1231 loss on the sale of land.Prior to this,Kayla's only Sec.1231 item was a $10,000 loss six years ago.Kayla is in the 28% marginal tax bracket.The amount of tax resulting from these transactions is
A)$2,700.
B)$3,600.
C)$4,000.
D)$5,040.

Question

Quizplus · Accepted Answer

A)The lookback rule does not apply because the last 1231 loss was six years ago.Therefore,the entire amount ($40,000- $22,000)is LTCG and is taxed at 15%.15% × $18,000 = $2,700.

During the Current Year,Kayla Recognizes a $40,000 Sec