During 2018, Thomas has a net Section 1231 gain of $57,000. In 2018, Thomas reported a net Section 1231 loss of $60,000. What is the character of the 2018 gain?
A)$60,000 long-term capital gain.
B)$60,000 ordinary gain.
C)$57,000 ordinary gain.
D)$57,000 long-term capital loss.
E)$57,000 long-term capital gain.

Question

Quizplus · Accepted Answer

Section 1231 gains and losses are treated as ordinary income or loss unless a taxpayer has a net Section 1231 gain for the year. In this case, Thomas has a net Section 1231 gain of $57,000, which means $57,000 of the gain will be treated as long-term capital gain, and the remaining $3,000 will be treated as ordinary income. The net Section 1231 loss of $60,000 from earlier in the year does not change the character of the gain in 2018. Therefore, choice C, $57,000 ordinary gain, is the correct answer.

During 2018, Thomas Has a Net Section 1231 Gain of $57,000