Section 1231 property refers to specific types of assets used in a trade or business that have depreciable value. This includes items such as equipment, vehicles, and rental real estate. When these assets are held for a certain period, they may qualify for capital gain treatment, allowing for a deductible ordinary loss if sold at a loss.
This term is primarily used in tax law. It is relevant for individuals and businesses that own depreciable assets and are considering the tax implications of selling or disposing of these assets. Users can manage related forms and procedures through resources like US Legal Forms, which provide templates for tax-related documentation.
Here are a couple of examples of abatement:
Example 1: A landscaping company purchases a truck for business use. After using it for several years, the company sells the truck at a loss. Since the truck is Section 1231 property, the company can deduct the loss on its tax return.
Example 2: A real estate investor owns a rental property for over a year. Upon selling the property, the investor incurs a loss. This loss can be treated as a capital loss under Section 1231. (hypothetical example)
The primary statute governing Section 1231 property is the Internal Revenue Code (IRC) Section 1231. This section outlines the treatment of gains and losses from the sale of certain types of business property.
| Term | Definition | Key Differences |
|---|---|---|
| Section 1231 Property | Assets used in a trade or business that have depreciable value. | Qualifies for capital gain treatment if held long-term. |
| Capital Assets | Property owned for investment purposes. | Does not include business-use assets; taxed differently. |
| Ordinary Income Property | Property that, when sold, results in ordinary income. | Taxed at ordinary income rates, unlike Section 1231 gains. |
If you own Section 1231 property and are considering selling it, consult a tax professional to understand the implications. You can also explore US Legal Forms for templates related to the sale of business assets and tax documentation.
Browse our library of 85,000+ state-specific legal templates.
| Attribute | Details |
|---|---|
| Type of Property | Depreciable assets used in a trade or business |
| Holding Period | More than one year |
| Tax Treatment | Capital gain treatment available for long-term assets |