Question

Which statements about Section 1231 assets are true? Pick all that apply!!

Question options:

If Section 1231 assets are sold and the taxpayer has a realized loss, the loss is a fully deductible ordinary loss


If Section 1231 assets held long-term are sold for a realized gain, the taxpayer has a long term capital gain that is taxed at favorable capital gains rates


If Section 1231 assets held long-term are sold for a realized gain, the taxpayer has a potential long term capital gain that may be taxed at favorable capital gains rates but this result often does not occur because of recapture provisions.


If Section 1231 assets are sold and the taxpayer has a realized loss, the is limited like a capital loss

Answer 1

The answer is below

Step-by-step explanation:

Given that Section 1231 assets are a term that is used to describe the real or depreciable trading property acquired for more than a year. For example, landed property, buildings, etc.

Hence, in this case, the correct answer or statement to the question are:

1. If Section 1231 assets are sold and the taxpayer has a realized loss, the loss is a fully deductible ordinary loss

2. If Section 1231 assets held long-term are sold for a realized gain, the taxpayer has a potential long term capital gain that may be taxed at favorable capital gains rates but this result often does not occur