Section 1231 gain refers to the gains from the sale of depreciable property or real property used in a business and held for more than one year
. These gains are considered "tax-efficient" and are taxed at a lower capital gains tax rate compared to short-term capital gains
. Examples of Section 1231 properties include buildings, machinery, land, and timber
. Section 1231 gains and losses are the taxable gains and losses from Section 1231 transactions, and their treatment as ordinary or capital depends on whether there is a net gain or a net loss from all transactions
. The IRS Form 4797, Sales of Business Property, is used to report Section 1231 gains on a sold property
. To calculate Section 1231 gains, you need to determine whether any of the gain is ordinary income under the depreciation recapture rules and then calculate the gain using the Depreciation To designation on the Disposition screen
. Transactions that result in gain or loss subject to Section 1231 treatment include sales or exchanges of real property or depreciable personal property used in a trade or business and held longer than one year
