Hans runs a sole proprietorship. Hans has reported the following net §1231 gains and losses since he began business. Net §1231 gains shown are before
Hans runs a sole proprietorship. Hans has reported the following net §1231 gains and losses since he began business. Net §1231 gains shown are before the look-back rule.
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Year Net §1231 Gains/(Losses)
\r\nYear 1 ($65,000)
\r\nYear 2 15,000
\r\nYear 3 0
\r\nYear 4 0
\r\nYear 5 10,000
\r\nYear 6 0
\r\nYear 7 (current year) 50,000
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a. What amount, if any, of the year 7 (current year) $50,000 net §1231 gain is treated as ordinary income?
\r\nb. Assume that the $50,000 net §1231 gain occurs in year 6 instead of year 7. What amount of the gain would be treated as ordinary income in year 6?
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