1231 property

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A section 1231 property under the Internal Revenue code includes: Depreciable property and real property (eg. land) used in a trade or business AND held for more than one year. Does not include: inventory, property held for sale in ordinary course of business, artistic creations held by their creator, government publications. All 1231 gains and losses are netted together. If the result is a loss, then it is an ordinary loss. If the result is a gain, then its ordinary income to the extent of "non-recaptured 1231 losses" in the prior 5 years. The remaining gain is Long term capital gain. It gets reported on Form 4797.

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