During the Current Year, Zach Had Taxable Income of $100,000

Multiple Choice

During the current year, Zach had taxable income of $100,000 before considering the following property transactions: Two years ago Zach had a $4,000 gain from the sale of a Section 1231 asset but last year Zach had no capital or Section 1231 gains or losses. What effect will the above property transactions have on Zach current taxable income and will there be any carryforward or carryback of gains or losses?

A) Reduces Zach's current taxable income by $4,000
B) Reduces Zach's current taxable income by $3,000 and he will carry $1,000 loss forward
C) Zach has $1,000 additional ordinary income this year due to recapture and he can carry the remaining losses forward
D) Zach has $1,000 additional ordinary income this year due to recapture, he can deduct $3,000 loss this year, and can carry any remaining losses forward