Question

Ashburn reported a $104,750 net §1231 gain in year 6. Assuming Ashburn reported $50,000 of nonrecaptured §1231 losses during years 1-5, what amount of Ashburn's net §1231 gain for year 6, if any, is treated as ordinary income?

Multiple Choice

$0.

$54,750

. $50,000.

$104,750.

None of the choices are correct.

Arlington LLC exchanged land used in its business for some new land. Arlington originally purchased the land for $29,000. The new land had a fair market value of $35,500. Arlington also received $3,000 of office equipment in the transaction. What is Arlington's gain or loss recognized on the exchange?

Multiple Choice

$0.

$3,000.

$6,500.

$9,500.

None of the choices are correct.

Answer 1

#1)

Answer - $50000.The 5 year look back period rule (section 1231) recharacterizes the amount $50000 of the Ashburn's $1231 gain to the ordinary income. It is the amount of previous 5 year losses that has got ordinary loss treatment.

#2)

Answer-$3000.Although this exhange qualify for like kind exchange, but gain is recognized on boot received. The basis of Arilington inc in new land will be same as carry over cost. Gain will be recognized as lower of Boot(3000) or Realized gain(35500+3000-29000=9500)

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