Vertigo, Inc., has a 2017 net § 1231 loss of $64,000 and had a $32,000 net § 1231 gain in 2016. For 2017, Vertigo's net § 1231 loss is treated as:
A)Ordinary loss.
B)Ordinary gain.
C)Capital loss.
D)Capital gain.
E)None of the above.

Question

Quizplus · Accepted Answer

When the net section 1231 loss is incurred in a tax year, it is treated as an ordinary loss. In this case, since Vertigo, Inc. had a net section 1231 loss in 2017, it will be treated as an ordinary loss. This means that the loss can offset other ordinary income and/or can be carried forward to future years to offset ordinary income.