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Since its formation, Roof Corporation has incurred the following net Section 1231 gains and losses . Year 1 $ (12,000 ) Net Section 1231 loss

Since its formation, Roof Corporation has incurred the following net Section 1231 gains and losses.

Year 1 $ (12,000 ) Net Section 1231 loss
Year 2 10,500 Net Section 1231 gain
Year 3 (14,000 ) Net Section 1231 loss

  1. In year 4, Roof sold only one asset and recognized a $7,500 net Section 1231 gain. How much of this gain is treated as capital gain, and how much is ordinary?
  2. In year 5, Roof sold one asset and recognized a $9,000 net Section 1231 gain. How much of this gain is treated as capital, and how much is ordinary?

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