Hans runs a sole proprietorship. Hans reported the following net §1231 gains and losses since he began business:
| Year |
Net §1231 Gainsy(Losses) |
|
Year 1
|
($65,000)
|
|
Year 2
|
15,000
|
|
Year 3
|
0
|
|
Year 4
|
0
|
|
Year 5
|
10,000
|
|
Year 6
|
0
|
|
Year 7 (current year)
|
50,000
|
a) What amount, if any, of the year 7 (current year) $50,000 net §1231 gain is treated as ordinary income?
b) Assume that the $50,000 net §1231 gain occurs in year 6 instead of year 7. What amount of the gain would be treated as ordinary income in year 6?