1231, 1245, 1250 assets for REG

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  • May 12, 2010 at 7:30 am #157669
    skiw97
    Participant

    Does anyone have a nice short trick to remember the key differences between the 3?

    No matter how many times I see the flashcards or review my notes, the differences really dont seem to stick, only the fact that they are all business assets held over a year.

    FAR 11/13 - 78, BEC 1/13 - 82, AUD 2/23 - 94, REG 5/15 - 86

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  • May 12, 2010 at 3:22 pm #228376
    jeff
    Keymaster

    Section 1231 – depreciable personal, real property used in trade or business and held > 1 year

    -Special capital gain treatment on net gains from sales, exchanges of certain non-capital assets

    -All 1231 losses are treated as ordinary loss, they are deducted immediately.

    -Gains to the extend of accumulated depreciation = ordinary income

    -Gain for sale in excess of original cost = 1231 capital gain

    Section 1245 (machinery and equipment, gain only)

    -personal business property assets used in trade or business for over a year (autos)

    -Upon a sale of a 1245 asset all accumulated depreciation is recaptured as ordinary income

    -Any remaining gain is a capital gain under section 1231

    Section 1250 (buildings, gains only)

    -real business property used in trade or business for over 1 year (warehouse)

    -Recaptures deprecation in excess of straight line

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