Question

For purposes of this subsection—

(A) In determining under this subsection whether gains exceed losses—
(i) the section 1231 gains shall be included only if and to the extent taken into account in computing gross income, and
(ii) the section 1231 losses shall be included only if and to the extent taken into account in computing taxable income, except that section 1211 shall not apply.

Answer 1

Section 1231 gains are included in taxable income if they are taken into account in computing gross income, while section 1231 losses are included in taxable income if they are taken into account in computing taxable income.

Step-by-step explanation:

For determining whether gains exceed losses, section 1231 gains are included only if and to the extent they are taken into account in computing gross income. On the other hand, section 1231 losses are included only if and to the extent they are taken into account in computing taxable income, with the exception that section 1211 does not apply.

To understand this better, it's important to know that taxable income is calculated by subtracting the deductions and exemptions from your adjusted gross income. So, section 1231 gains will be included in your taxable income only if they are already included in your gross income, whereas section 1231 losses will be included in your taxable income only if they have been taken into account in computing your taxable income.