During 2013,Silverado Corporation has the following Section 1231 gains and losses:
$\begin{array}{lc}
\text { Casual ty loss } &\$(10,000) \
\text { Section 1231 gains } &12,000 \
\text { Section 1231 losses } &(3,000)
\end{array}$
During the period 2008 - 2012,the corporation recognized $8,000 of net Section 1231 losses as ordinary losses that have not been recaptured.How much of the 2013 Section 1231 gains and losses are recognized as long-term capital gains?
A)$ - 0 -
B)$ 1,000
C)$ 9,000
D)$10,000
E)$12,000

Question

Quizplus · Accepted Answer

The net Section 1231 gain for 2013 is $9,000 ($12,000 gain - $3,000 loss). However, due to the $8,000 of unrecaptured Section 1231 losses from previous years, $8,000 of the 2013 gain is treated as ordinary income. Therefore, only $1,000 is recognized as long-term capital gain.

During 2013,Silverado Corporation Has the Following Section 1231 Gains and Losses