TAX 9863 Lecture Notes - Lecture 9: Ordinary Income, Capital Asset, Federal Reporter
Document Summary
Two special rules: (1) the section 1231(a)((4)(c) subhotchpot, pp. Creates a sub hotchpot rule that must be applied prior to consideration of main hotchpot consequences. When involuntary conversion, tp compares allowable casualty gains/losses from trade/business or profit seeking assets. If gains > losses then all these gains and losses move into the main hotchpot which creates net capital gain. If losses > gains then section 1231 doesn"t apply to any of such gains or losses remaining gain/losses and never enter main hotchpot. Beneficial to tp because when loss > gain = net ordinary loss. Ordinary loss is more valuable b/c offsets ordinary income which is taxed at ordinary rate. If sum of gains and losses from certain involuntary conversions property (fire/other casualty/theft) result in a net loss then main hotchpot rule does not apply to gains and losses from specified involuntary conversions. Result of main hotchpot rule not applying is that these gains/losses from specified involuntary conversions are treated as:
