J.K. Lasser's Small Business Taxes 2017

CHAPTER 6 Gains and Losses from Sales of Business Property

1. Section 1231 Gains and Losses
2. Sale-Leasebacks
3. Installment Sales
4. Recapture
5. Involuntary Conversions
6. Abandonment, Foreclosure, and Repossession of Property
7. Sale of All the Assets of the Business

Businesses hold a unique category of assets called Section 1231 property. This category is named after the section in the Internal Revenue Code that created them. Upon the disposition of these assets, you can realize the best of both possible worlds—capital gain treatment for profitable sales and ordinary loss treatment for sales that result in a loss. Gain may be recognized all at once or deferred through an installment sale.

You may also realize gains or losses from other transactions involving business property, including involuntary conversions, abandonment or repossession of property, or the sale of all of the assets of the business.

Complex rules govern the overall treatment of these transactions. (The treatment of capital gains and losses from other property is also discussed in Chapter 5.) The purpose of this chapter is to alert you to the basic rules governing certain sales of business property. If any transaction applies to your business, you may wish to delve deeper with the assistance of a tax professional.

For further information about capital gains and losses, see IRS Publication 537, Installment Sales, and IRS Publication 544, Sales and Other Dispositions of Assets.

Section 1231 Gains and Losses

Certain assets ...