Q: Illustrate the Tier system.
Illustration:
Tier One
Involuntary Conv. of 1231(b) assets & LTCA held in connection w/ a T or B for profit
Tier One losses receive two chances w/in the framework to be classified as ordinary
Tier 1 gains and losses if Tier 1 losses exceed gains are treated as ordinary
At any time gains exceed losses, LTCG & LTCL treatment applies under 1231
Tier Two
1) T1 G & L if T1 gains = or > losses
2) sales or exchanges of 1231(b) assets
3) Condemnation of 1231(b) assets or LTCA held in connection w/ T or B for P
a. For each Tier, you net all the listed items and then compare and see if gains exceed loss
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