Verway,Inc. ,has a 2016 net § 1231 gain of $55,000 and had a $62,000 net § 1231 loss in 2015.For 2016,Verway's net § 1231 gain is treated as:
A)$55,000 ordinary loss.
B)$55,000 ordinary gain.
C)$55,000 capital loss.
D)$55,000 capital gain.
E)None of the above.

Question

Quizplus · Accepted Answer

Net § 1231 gains are treated as ordinary income unless there is a net § 1231 loss in the previous year, in which case they are treated as long-term capital gains. Since Verway had a net § 1231 loss in 2015, their 2016 net § 1231 gain of $55,000 will be treated as an ordinary gain.