Wilma had a loss of $25,000 on some bearer bonds that were stolen and never recovered. She suffered a $20,000 loss when a piece of land she had held as an investment was condemned to make way for a new city park. She also had a Section 1231 gain of $60,000 and a Section 1231 loss of $15,000 from asset sales by her sole proprietorship.
a. Determine the result of both Step 1 and Step 2 of the Section 1231 netting process and explain the treatment of the resulting gains or losses.
b. How would your answer change if Wilma had a Section 1231 loss of $12,000 two years ago?