Section 1231 Gains and Losses (LO. 6) Fred's Foam Foundations (FFF) is a sole proprietorship that Fred started in 2014. Before the current year, FFF had not disposed of any property it owned. During the current year, FFF has the following gains and losses: Casualty gain on building $5,000 Section 1231 gains 3,000 Section 1231 losses 17,000 What is the effect of these transactions on Fred's taxable income? The Section 1231 netting results in an ordinary loss deduction of $ 2,000 x , reducing Fred's taxable income by $ 3,000 X