We have to track losses under sec. 1231 for five years, and apply them against any portion of gains which qualify as LTCG income.
The question: Can such gains and losses be netted together, or must the losses stand alone?
Example: BillyBob has reported s.1245 losses of $1500 for 2009 and $1000 for 2007. He reported gains due to s. 1245 property recapture of $1280 in 2009. It follows that none of the gains/losses has expired due to 5 years of passing.
In 2010 BillyBob sells his bulldozer for $30,000. He originally purchased it in 2007 for $25,000 and has taken $10,000 in depreciation. What is the character of his gain?
1. $15,000 total gain. $12,250 ordinary income and $2500 LTCGain to Sch D.
2. $15,000 total gain. $10,000 ordinary income and $5000 LTCGain to Sch D.
3. $15,000 total gain. $11,220 ordinary income and $3780 LTCGain to Sch D.
The question: Can such gains and losses be netted together, or must the losses stand alone?
Example: BillyBob has reported s.1245 losses of $1500 for 2009 and $1000 for 2007. He reported gains due to s. 1245 property recapture of $1280 in 2009. It follows that none of the gains/losses has expired due to 5 years of passing.
In 2010 BillyBob sells his bulldozer for $30,000. He originally purchased it in 2007 for $25,000 and has taken $10,000 in depreciation. What is the character of his gain?
1. $15,000 total gain. $12,250 ordinary income and $2500 LTCGain to Sch D.
2. $15,000 total gain. $10,000 ordinary income and $5000 LTCGain to Sch D.
3. $15,000 total gain. $11,220 ordinary income and $3780 LTCGain to Sch D.
Comment