We use cookies to improve security, personalize the user experience,
enhance our marketing activities (including cooperating with our marketing partners) and for other
business use.
Click "here" to read our Cookie Policy.
By clicking "Accept" you agree to the use of cookies. Read less
What is Section 1245? A Comprehensive Guide to Its Legal Definition
Definition & Meaning
Section 1245 refers to a part of the Internal Revenue Code that addresses the tax treatment of depreciable personal property. This includes items like equipment and vehicles that businesses use in their operations. Under Section 1245, if a business sells such property for more than its depreciated value, it may qualify for favorable capital gains tax treatment on the profit exceeding the depreciation amount.
Table of content
Legal Use & context
Section 1245 is primarily used in tax law, particularly in the context of business taxation. It is relevant for businesses that buy, sell, or trade depreciable personal property. Understanding this section is crucial for tax planning and compliance, as it can significantly affect a business's tax liabilities. Users can manage related tax forms and calculations using templates available from US Legal Forms, which are drafted by licensed attorneys.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A construction company purchases a bulldozer for $100,000 and depreciates it over five years. After three years, the company sells the bulldozer for $80,000. The gain from the sale may be subject to favorable capital gains tax treatment, as it exceeds the depreciated value.
Example 2: A small business buys a delivery van for $30,000 and depreciates it. If the business sells the van for $25,000, the gain may qualify for capital gains tax treatment under Section 1245. (hypothetical example)
Relevant laws & statutes
The primary statute relevant to Section 1245 is the Internal Revenue Code, specifically the provisions governing depreciation and capital gains. For detailed tax implications, refer to IRS guidelines and publications regarding asset sales and depreciation.
Comparison with related terms
Term
Description
Key Differences
Section 1245
Tax treatment for depreciable personal property.
Focuses on personal property and capital gains.
Section 1250
Tax treatment for depreciable real property.
Applies to real estate rather than personal property.
Common misunderstandings
What to do if this term applies to you
If you are involved in the sale of depreciable personal property, it is essential to understand how Section 1245 may impact your tax obligations. You may want to consult a tax professional to ensure you comply with all regulations. Additionally, consider using US Legal Forms to access templates that can help you manage the necessary documentation efficiently.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.