In: Accounting
Negasonic Teenage Warhead has a $40,000 § 1245 gain, a $35,000 § 1231 gain, a $33,000 § 1231 loss, a $3,000 § 1231 lookback loss, and a $15,000 long-term capital gain. After conducting the appropriate netting process (please show your work), how much gain or loss will Negasonic report and what is the character of that gain or loss?
Particulars | Amount |
1231 gain | 35,000 |
1231 loss | (33,000) |
1245 gain | 40,000 |
Net 1231 gain | 42,000 |
Less look back recapture | (3,000) |
Net 1231 gain for the year | 39,000 |
Ordinary income due to look back rule is $3,000.
Particulars | Amount | |
Net 1231 gain for the year | 39,000 | |
Add | Long-term capital gain | 15,000 |
net long-term capital gain | 54,000 |
Note: first 1231 gains and losses are netted together, to which 1245 gains are added. From that 1231 look back amount is treated as ordinary income and the balance as long-term capital gain.