Procedure For sec. 1231 Following steps are necessary to determine Sec. 1231 treatment All non-personal casualty and theft gains are netted If net loss, there is ordinary treatment If net gain, the amount is included in the regular Sec. 1231 netting Determine the net amount of Sec. 1231 gain or loss, by including net gain from step 1 If this netting results in a net gain, the gain is treated as a net long-term capital gain If the netting results in a net loss, it is treated as ordinary lossProcedure For Sec. 1231 • Following steps are necessary to determine Sec. 1231 treatment • All non-personal casualty and theft gains are netted – If net loss, there is ordinary treatment – If net gain, the amount is included in the regular Sec. 1231 netting • Determine the net amount of Sec. 1231 gain or loss, by including net gain from step 1 • If this netting results in a net gain, the gain is treated as a net long-term capital gain **** • If the netting results in a net loss, it is treated as ordinary loss