Verway, Inc., has a 2017 net § 1231 gain of $55,000 and had a $62,000 net § 1231 loss in 2016. For 2017, 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 or losses are treated as long-term capital gains or losses. However, if a taxpayer has a net §1231 loss in the current year, it is treated as an ordinary loss. In this case, Verway had a net §1231 loss in 2016 and a net gain in 2017, so the gain is treated as an ordinary gain. Therefore, the correct answer is B.