Don't overlook these!
Updated for 2012
Section 1231 Transactions include:
1) Real property or depreciable property:
Sales or exchanges of real property or depreciable property used in a trade or business and held over one year. This includes rental property. Rental property is considered business property since it is used for the production of income.
Holding period: To determine your holding period, start counting on the day after you received the property and include the day you dispose of it.
Section 197 intangibles: Depreciable personal property includes amortizable Section 197 intangibles. These are intangible assets acquired in the acquisition of a business. For example, trademarks, trade names, and customer lists.
2) Sales or exchanges of leaseholds:
The leasehold must be used in a trade or business and held over one year.
3) Cattle and horses:
Sales or exchanges of cattle and horses held for draft, breeding, dairy, or sporting purposes and held for 24 months or more.
4) Livestock (excluding poultry):
Sales or exchanges of other livestock, excluding poultry.
The livestock must be held for draft, breeding, dairy, or sporting purposes and held for 12 months or more.
5) Sales of exchanges of unharvested crops:
The crop and land must be sold, exchanged, or involuntarily converted at the same time and to the same person and the land must be held over 1 year.
6) Cutting of timber:
The taxpayer elects to treat the cutting of timber as a sale under Section 631(a).
The taxpayer must have either owned the timber for over 1 year or held a contract right for more than 1 year to cut the timber.
7) Disposal of timber with an economic interest:
Disposal of timber held over 1 year before disposal that is treated as a sale or outright sale of timber under Section 631(b).
8) Disposal of coal or domestic iron ore with a retained economic interest:
Disposal of coal (including lignite), or iron ore mined in the United States held more than 1 year before disposal treated as a sale under Section 631(c).
The condemned property must have been held over 1 year.
The property must be business property or a capital asset held in connection with a trade or business or a transaction entered into for profit, such as investment property (not property held for personal use).
10) Casualties and thefts:
The casualty or theft must have affected business property, property held for the production of rents and royalties, or investment property (e.g., notes and bonds).
You must have held the property over 1 year.
If your casualty or theft losses are more than your casualty or theft gains, neither the gains nor the losses are taken into account in the Section 1231 computation.
Section 1231: What is Not Section 1231 Property?
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