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Section 1231 Assets

Which of the following are Section 1231 assets? Explain. Assume all the items have been held long-term.

a. Machinery used in the business
b. Personal home
c. Factory building
d. Land held as an investment
e. Land used in a business
f. Shares of stock in Jones Corporation
g. Inventory
h. Musical composition held by the composer

Solution Preview

IRC section 1231(a)(3)(A) states that "The term "section 1231 gain" means-
(i) any recognized gain on the sale or exchange of property used in the trade or business, and
(ii) any recognized gain from the compulsory or involuntary conversion (as a result of destruction in whole or in part, theft or seizure, or an exercise of the power of requisition or condemnation or the threat or imminence thereof) into other property or money of-
(I) property used in the trade or business, or
(II) any capital asset which is held for more than 1 year and is held in connection with a trade or business or a transaction entered into for profit."

IRC section 1231(b)(1) states that "The term "property used in the trade or business" ...

Solution Summary

This solution discusses Internal Revenue Code Section 1231 and then applies its provisions to a set of assets to determine whether each is a "1231 asset."

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