A taxpayer sells a business asset (Section 1231 asset) for a gain of $50,000. In the previous 5 years, they had $20,000 of Section 1231 losses that were deducted as ordinary losses. How is the $50,000 gain taxed?

1. Identify Gain: $50,000 Section 1231 Gain.<br/>2. Check Lookback Rule: Have 1231 losses been deducted in last 5 years?<br/>3. Fact: $20,000 of non-recaptured 1231 losses.<br/>4. Rule: Current year 1231 gain is ordinary income to the extent of non-recaptured 1231 losses.<br/>5. Result: $20,000 Ordinary; $30,000 Capital (LTCG).