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 |
|
Ans
Following assumptions will be made
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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