An individual had the following gains and losses during 2012 on property held for the long-term holding period: sale of Orange common stock ($8,000 gain); sale of real property used in the taxpayer's business ($1,800 loss); destruction of real property used in the taxpayer's business by fire ($1,000 loss).Which of the following statements is correct?
A)The fire loss would reduce the real property sale loss.
B)The fire loss would reduce the stock sale gain.
C)The sale of real property loss would be netted against the stock sale gain.
D)The sale of real property is a § 1231 loss.
E)None of the above.

Question

Quizplus · Accepted Answer

The sale of real property used in the taxpayer's business is a § 1231 loss, which is treated separately from other gains and losses. The destruction of real property used in the taxpayer's business by fire is also a § 1231 loss, and it can be netted against any § 1231 gains. However, it cannot be netted against gains from the sale of non-business property (such as the Orange stock). Therefore, the fire loss does not affect the Orange stock sale gain, and it cannot be used to reduce the real property sale loss.

An Individual Had the Following Gains and Losses During 2012