Vertical,Inc. ,has a 2015 net § 1231 gain of $67,000 and had a $22,000 net § 1231 loss in 2014.For 2015,Vertical's net § 1231 gain is treated as:
A)$45,000 long-term capital gain and $22,000 ordinary loss.
B)$67,000 ordinary gain.
C)$45,000 long-term capital gain and $22,000 ordinary gain.
D)$67,000 capital gain.
E)None of the above.

Question

Quizplus · Accepted Answer

Net § 1231 gains are classified as long-term capital gains, while net § 1231 losses are classified as ordinary losses. Since Vertical had a net § 1231 loss in 2014, the 2015 net § 1231 gain of $67,000 is treated as a long-term capital gain of $45,000 and an ordinary gain of $22,000, as the ordinary gain is used to offset the 2014 net § 1231 loss. Therefore, choice C is the correct answer.