J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

CHAPTER 6

Gains and Losses from Sales of Business Property

Alert

At the time this book was printed, Congress had not extended numerous breaks for 2012 that had expired at the end of 2011. Check the online supplement in February 2013 at www.jklasser.com or www.barbaraweltman.com to see whether these breaks apply for 2012 returns.

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.

In this chapter you will learn about:

• Section 1231 gains and losses
• Installment sales
• Recapture
• Involuntary conversions
• Abandonment, ...