Question

Spencer has an investment in two parcels of vacant land. Parcel 1 is a capital asset and parcel 2 is a § 1231 asset. Spencer already has a short-term capital loss for the year that he would like to offset with capital gain. He has a § 1231 lookback loss that exceeds the gain from the disposition of either land parcel. Spencer wants to sell only one land parcel: each of them would yield the same amount of gain. The gain that would be recognized exceeds the short-term capital loss Spencer already has. Which of the following statements is correct?

A) Spencer will have a net capital loss no metter which land percel he sells
B) spencer will have a net capital loss if he sells parcel 2.
C) spencer will have a net capital loss if he sells parcei 1.
D) spencer will have a net capital gain if he sells either parcel 1 or parcel 2.
E) None of the above.

Answer 1

The correct answer is b. Spencer will have a net capital loss if he sells parcel 2.

Step-by-step explanation:

When a person sells a capital asset, the sale usually results in a capital gain or loss. Capital assets include inherited assets or assets that someone owns for personal use or as an investment.

Earnings and loses. A capital gain or loss is the difference between the base and the amount that the seller obtains when selling an asset. The base is generally what the seller paid for the asset.