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5 terms

Section 1231, 1245, 1250 and depreciation

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Section 1231 Assets
sale or exchange or real or depreciable business property, involuntary conversion of business property, involuntary conversion of certain capital assets, certain farming transactions involving crops and livestock, transactions involving timber, iron, ore and coal, must be long-term property
Benefits of Section 1231 Assets
gains and losses are grouped and compared, net gain considered ordinary income to the extent of net 1231 losses claimed in the previous five year, any remaining is a long-term capital gain, any net losses are treated as ordinary losses
Casualty and theft losses
gains and losses from involuntary conversions must be grouped separately, if a gain occurs it is added to other 1231 gains, net losses are treated as ordinary loss and not grouped together
Section 1245 (recapture)
Requires any gain on section 1245 property be treated as ordinary income to the extent of all depreciation taken
Section 1250 Property
Applies to real property, requires excess depreciation (MACRS over straight-line) be recaptured as ordinary income