An individual has the following recognized gains and losses from disposition of § 1231 assets (all the assets were vacant land): $15,000 gain, $10,000 loss, $25,000 gain, and $2,000 loss. The individual has a $5,500 § 1231 lookback loss. The individual also has a $16,000 net short-term capital loss from the disposition of stock. Which of the following statements is correct?
A) The taxpayer has $5,500 ordinary gain and $6,500 net long-term capital gain.
B) The taxpayer has $12,000 net long-term capital gain.
C) The taxpayer has $28,000 ordinary gain and $16,000 net short-term capital loss.
D) The taxpayer has $5,500 ordinary loss and $6,500 net long-term capital gain.
E) None of the above.

Question

Quizplus · Accepted Answer

The net § 1231 gain is $28,000 ($15,000 + $25,000 - $10,000 - $2,000). The $5,500 lookback loss is recaptured as ordinary income, leaving a $22,500 net § 1231 gain. This is treated as a long-term capital gain. After offsetting the $16,000 short-term capital loss, the taxpayer has a $6,500 net long-term capital gain.

An Individual Has the Following Recognized Gains and Losses from Disposition