Verway, Inc., has a 2018 net § 1231 gain of $55,000 and had a $62,000 net § 1231 loss in 2016. For 2018, 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

The net § 1231 gain of $55,000 in 2018 is treated as ordinary gain because it is subject to the § 1231 lookback rule, which recaptures the prior net § 1231 loss of $62,000 from 2016 as ordinary income.