An individual has the following recognized gains and losses from disposition of § 1231 assets (all the assets were vacant land): $15,000 gain, $10,000 loss, $25,000 gain, and $2,000 loss. The individual has a $5,500 § 1231 lookback loss. The individual also has a $16,000 net short-term capital loss from the disposition of stock. Which of the following statements is correct?
a. The taxpayer has $5,500 ordinary gain and $6,500 net long-term capital gain.
b. The taxpayer has $12,000 net long-term capital gain.
c. The taxpayer has $28,000 ordinary gain and $16,000 net short-term capital loss.
d. The taxpayer has $5,500 ordinary loss and $6,500 net long-term capital gain.
e. None of the above.
a
RATIONALE: There is a net § 1231 gain of $28,000 ($15,000 – $10,000 + $25,000 – $2,000). $5,500 of the gain is treated as ordinary gain due to the $5,500 § 1231 lookback loss and the balance of $22,500 is treated as a long-term capital gain. The $22,500 is netted against the $16,000 net short-term capital loss and results in a $6,500 net long-term capital gain.
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