Question

Mindy's Marble Shop has a net Section 1231 gain in the current year of $18,000. In the previous five years, there are $13,000 in unrecaptured Section 1231 losses. How will Mindy's gain be taxed in the current year?

Answer 1

Taxable gain is $5,000 in the current year.

Step-by-step explanation:

The section 1231 says that the unrecaptured losses in trading can be carried forward for a forseeable future to set off these losses against trading gains to decrease the tax liabilities. Hence the net gain that is taxable is calculated as under:

Taxable Gain = $18,000 - $13,000 = $5,000