Betty, a single taxpayer with no dependents, has the gains and losses shown belo
ID: 2581648 • Letter: B
Question
Betty, a single taxpayer with no dependents, has the gains and losses shown below.
Before considering these transactions, Betty has $45,000 of other taxable income.
What is the treatment of the gains and losses and what is Betty’s taxable income?
§ 1245 gain #1 $18,000
§ 1245 gain #2 5,000
Business equipment long-term casualty loss (8,000)
Business real property long-term casualty gain 12,000
§ 1231 gain 13,000
§ 1231 lookback loss (2,000)
Explanation / Answer
Ordinary gain due to recapture under Section 1245 : The Section 1245 are added resulting in $23,000 ($18,000 +$5,000) ordinary gain.
Net long term capital gain & ordinary gain
Computation of Betty’s taxable income
Other taxable income $45,000 Ordinary gain due to recapture under Section 1245 $23,000 Ordinary gain due to section 1231 lock back loss $2,000 Net long term capital gain $15,000 Taxable Inome $85,000Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.