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Q：
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What is Section 1231 Property?
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A：
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Section 1231 property generally refers to property that is used in a trade or business; held for more than one year; and consists primarily of depreciable property or real property. Although such property is generally excluded from the definition of a capital asset under IRC §1221, IRC §1231 provides special tax treatment under which gains from the disposition of qualifying Section 1231 property may receive long-term capital gain treatment if certain requirements are met.
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Q：
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What is a Section 1231 Gain?
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A：
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Gains from the sale or exchange of business property. Examples include gains recognized on the sale or exchange of Office buildings; Warehouses; Machinery and equipment; Manufacturing equipment; and Other qualifying property used in a trade or business.
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Gains from involuntary conversions. Examples include gains resulting from compensation received due to Fire; Hurricanes; Floods; Theft; Government condemnation (eminent domain); or Property seizure or confiscation.
If, for a taxable year, total Section 1231 gains exceed total Section 1231 losses, the net gain is generally treated as a long-term capital gain, subject to the applicable recapture rules.
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Q：
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What is a Section 1231 Loss?
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A：
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A Section 1231 loss is a recognized loss arising from the sale of property; exchange of property; or involuntary conversion of property.
If, for a taxable year, total Section 1231 losses exceed total Section 1231 gains, the net loss is generally treated as an ordinary loss and may be deductible against ordinary income, subject to applicable tax rules.
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Q：
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What types of assets qualify as Section 1231 Property?
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A：
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Depreciable property used in a trade or business, such as machinery and equipment; manufacturing equipment; office furniture and fixtures; and business vehicles.
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Real property used in a trade or business, such as office buildings; manufacturing facilities; Warehouses; and Commercial land.
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Certain livestock, including Cattle and horses held for breeding, draft, dairy, or sporting purposes and held for at least 24 months; and Other qualifying livestock held for the applicable statutory holding period.
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