Hank realizes Section 1231 losses of $12,000 and Section 1231 gains of $7,000 during the current year. Hank's current-year adjusted gross income will increase (decrease) by what amount?

Question

Quizplus · Accepted Answer

Section 1231 gains and losses are netted against each other at the end of the year. In this case, Hank has $12,000 in Section 1231 losses and $7,000 in Section 1231 gains. When netted, Hank has a net Section 1231 loss of $5,000, which will decrease his adjusted gross income by that amount.

Hank Realizes Section 1231 Losses of $12,000 and Section 1231