Question

Code § 1231 requires netting of § 1231 gains and losses. If the result is a gain, it may be treated as a long-term capital gain.

a) True
b) False

Answer 1

Yes, it is true that IRC § 1231 requires netting of § 1231 gains and losses, and if a net gain results, it may be classified as a long-term capital gain, which is taxed favorably.

Step-by-step explanation:

The statement is true: Internal Revenue Code Section 1231 does require the netting of Section 1231 gains and losses. If the outcome of this netting process results in a gain, indeed, the gain can be treated as a long-term capital gain. This special tax treatment is beneficial because long-term capital gains are generally taxed at a lower rate than ordinary income. In other words, if in a taxable year the net section 1231 gains exceed the net section 1231 losses, the gains are subject to preferential capital gains tax rates.