Companies may sell assets other than inventory items. These sales may result in gains or losses that are classified as capital gains or losses. Similarly, companies may exchange assets, also producing capital gains or losses unless tax-free exchange rules apply. Furthermore, owners may sell their interests in the business for gain or loss.
Capital gains generally are treated more favorably than other types of income. However, C corporations do not realize any significant tax benefit from capital gains. What's more, capital losses may be subject to special limitations.
The treatment of gains and losses from Section 1231 property and income resulting from depreciation recapture are discussed in Chapter 6.
For further information about capital gains and losses, see IRS Publication 537, Installment Sales; IRS Publication 544, Sales and Other Dispositions of Assets; and IRS Publication 550, Investment Interest and Expenses ...