Problem 1 Four Friends Forever (FFF), opened several years ago and reports the following net 1231 gains and losses since it began business.

Year	Net 1231 Gains/(Losses)
Year 1	($11,000)
Year 2	8,000
Year 3	(15,000)
Year 4	(22,000)
Year 5	20,000
Year 6	(27,000)
Year 7 (current year)	107,000

Character of the year 7 $107,000 gain (Basically Professor want to know what the character (short, long, 1245. 1250, 1231, etc) of the gain in year 7 is)

PROBLEM 2

Tracy started his sole proprietorship business two years ago and has never sold a 1231 asset. Tracy owned each of the assets for the entire 2 years he has been in business. In the current year, he sold the following business assets:

Asset	Original Cost	Accumulated Depreciation	Gain/Loss
Desks	$8,000	$2,000	($2,000)
Truck	12,000	6,000	(6,000)
Equipment	18,000	12,000	13,500
Building	150,000	10,000	25,000

Assuming Tracys marginal ordinary income tax rate is 30 percent, what is the character of Tracys gains and/or losses for the current year? What effect do the various gains or losses have on Tracys tax liability?