Answered

Discover a world of knowledge at Westonci.ca, where experts and enthusiasts come together to answer your questions. Explore thousands of questions and answers from knowledgeable experts in various fields on our Q&A platform. Discover detailed answers to your questions from a wide network of experts on our comprehensive Q&A platform.

Proctor Inc. was incorporated in 2014 and adopted a calendar year. Here is a schedule of Proctor's net Section 1231 gains and (losses) reported on its tax returns through 2019. 2014 2015 2016 2017 2018 2019 $-0- $(3,800) $9,040 $(15,900) $-0- $-0- In 2020, Proctor recognized a $25,000 gain on the sale of business land. How is this gain characterized on Proctor's tax return

Sagot :

Answer:

This gain is characterized on Proctor's tax return as $15,900 ordinary gain and $9,100 Section 1231 gain.

Explanation:

The following sorted schedule of Proctor's net Section 1231 gains and (losses) reported on its tax returns through 2019 are given in the question.

2014           2015          2016           2017         2018        2019

$-0-        $(3,800)      $9,040      $(15,900)      $-0-         $-0-

The explanation of the answer is now given as follows:

The $9,040 Section 1231 profit in 2016 made the loss of $3,800 Section 1231 loss in 2015 to be recaptured in 2016.

Consequently, the only loss that must be recaptured in 2020 is the 2017 Section 1231 loss.

Therefore, we have:

Section 1231 gain = Gain on the sale of business land in 2020 - Section 1231 loss in 2017 = $25,000 - $15,900 = $9,100

Therefore, this gain is characterized on Proctor's tax return as $15,900 ordinary gain and $9,100 Section 1231 gain.

Thanks for using our platform. We're always here to provide accurate and up-to-date answers to all your queries. Thank you for visiting. Our goal is to provide the most accurate answers for all your informational needs. Come back soon. We're here to help at Westonci.ca. Keep visiting for the best answers to your questions.