Using the Moab Incorporated §1231 netting process shown (capital gain $0, capital loss $(4,000)), what are the capital gain and the net capital gain (or loss) reported on the tax return?

From the recognized gains or losses determined in part 1, determine the net §1231 gain or loss, the net ordinary gain or loss, and the net capital gain or loss Moab will recognize on its tax return. M...

From the recognized gains or losses determined in part 1, determine the net §1231 gain or loss, the net ordinary gain or loss, and the net capital gain or loss Moab will recognize on its tax return. Moab Incorporated also has $4,000 of nonrecaptured net §1231 losses from previous years. Note: Do not round intermediate computations. Loss amounts should be indicated by a minus sign.

§1231 Netting Process:
§1231 gain $32,100
§1231 loss $0
Net §1231 gain $32,100
Nonrecaptured §1231 losses $(4,000)
Net §1231 gain $28,100
Ordinary Income:
§1245 recapture $18,000
§291 recapture $3,000
Ordinary income $4,000
Ordinary loss $(270)
Ordinary income from §1231 netting $4,000
Total
Capital Gains and Losses:
Capital gain $0
Capital loss $(4,000)
Net capital gain $(4,000)

Using the Moab Incorporated §1231 netting process shown (capital gain $0, capital loss $(4,000)), wh...

Answer

Moab’s capital gain is $0. With a %%DOLLAR%%4,000 capital loss, Moab’s net capital gain (loss) is $(4,000), meaning a net capital loss of $4,000.

Explanation

What you are being asked to pull from the schedule

The question only concerns the capital gain and the net capital gain (or loss). So we look only at the “Capital Gains and Losses” section, not the §1231 or ordinary income sections.

Reading the Capital Gains and Losses lines

From the provided amounts:

Capital gain: $0
Capital loss: $(4{,}000)$

Computing net capital gain (loss)

Net capital gain (loss) is: $$\text{Net capital gain (loss)} = \text{Capital gains} - \text{Capital losses}$$ Substitute the given numbers: $$0 - 4{,}000 = -4{,}000$$ So the net result is a $4,000 net capital loss.

Final values to report

Capital gain: $0
Net capital gain (loss): $(4{,}000)$

Skills You Achive

tax accounting capital gains and losses corporate taxation reading tax netting schedules

Using the Moab Incorporated §1231 netting process shown (capital gain $0, capital loss $(4,000)), what are the capital gain and the net capital gain (or loss) reported on the tax return?

What you are being asked to pull from the schedule

Reading the Capital Gains and Losses lines

Computing net capital gain (loss)

Final values to report

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