Question

BeMoFigRymph opened several years ago and reports the following net §1231 gains and losses since it...

BeMoFigRymph opened several years ago and reports the following net §1231 gains and losses since it began business.

Year

Net §1231 Gains/(Losses)

Year 1

($11,000)

Year 2

8,000

Year 3

(15,000)

Year 4

(22,000)

Year 5

20,000

Year 6

(27,000)

Year 7 (current year)

107,000

Character  of the year 7 $107,000 gain

Homework Answers

Answer #1

Ans

Following assumptions will be made

  • The non recaptured §1231 losses from during Year 1 to year 6 is $47,000 ( $-11,000 +$8000+($-15,000) +($-22,000)+$20,000+($-27,000)
  • The net §1231 gain for year 7 is $107,000

The $ 47,000 will be treated as ordinary income and $ 60,000 will be treated as §1231 gain

s.no

description

amount

explanation

1

Current gain (year 7) §1231

$   107,000

year 7 gain given

2

non recaputred losses §1231

$47,000

total from year 1 to year 6

3

ordinary income

$     47,000

lesser of S.no 1 or 2

4

§1231 gain

$     60,000

current gain - ordinary income

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