What is the difference between Sec1231 property and Sec 1245 property?
Posted by admin | Posted in Home | Posted on 30-01-2009
1
Brian asked:
If somebody transfers machinery used in their propietorship to a new corporation and it qualifies under Sec 351, and the property had been depreciated, but the corporation laters sells the machinery at a gain less than the original depreciation taken before the transfer, does 1231 or 1245 apply?
The book doesn’t explain well.
Content by Home Decor Zine
If somebody transfers machinery used in their propietorship to a new corporation and it qualifies under Sec 351, and the property had been depreciated, but the corporation laters sells the machinery at a gain less than the original depreciation taken before the transfer, does 1231 or 1245 apply?
The book doesn’t explain well.
Content by Home Decor Zine
Content by Fun Joomla
Dear John: This is a tuff one. IRC Section 1231 (title 26) defines the sale of property used in a trade or business as Section1231. Section 1245 covers the disposition of certain depreciated property as Sec 1245. I could not determine the exact Section unless we know more about the machinery, but I am leaning toward Section 1245. Remember to recapture the depreciated amount to determine basis and also the gain is taxed as ordinary income.
This advice was prepared based on our understanding of the law in effect at the time it was written as it applies to the facts that you provided. Click on my profile to read more.
Errol Quinn Enrolled Agent Master Tax Advisor