# Owned the land for three years and it had a 20000

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owned the land for three years and it had a \$20,000 adjusted basis.
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Refer back to the result in (g) below, since: \$10,000 of §1231 gain < \$11,000 of §1231 loss The \$10,000 gain and \$11,000 loss are characterized as ordinary income and expenses, respectively. §1231(a)(2). (g) Same as (f), above, but the sale price of the land is \$15,000 ? Loss realized = \$15,000 - \$20,000 = (\$5,000) This \$5,000 loss is deductible under §§165(a) and (c)(2) – Loss incurred in a transaction entered into for profit and is an above the line deduction under §62(a)(3). §1245 does NOT apply, since §1245 only deals with gain. However, this land is a §1231 property because it meets the §1231(a)(3)(A)(i) definition of “real property used in trade/business” As a result, the \$15,000 loss is considered a §1231 loss under §1231(a)(3)(B). Refer back to the result in (g) below, since: \$10,000 of §1231 gain > \$5,000 of §1231 loss The \$10,000 gain and \$5,000 loss are characterized as LTCG and LTCL, respectively. §1231(a)(1). (d) §1250 *** §1250(c) – §1250 Property Requirement: 1. Real property (as opposed to “personal property” under §1245) 2. Which is subject to allowance for depreciation provided in §167. ***§1250(a)(1) – Additional Requirement*** 3. Must be disposed of 49
*** §1250(b)(1) – Additional Depreciation 1. For §1250 property sold within one year or less, it is all depreciated. 2. For §1250 property held for more than one year, the additional depreciation is determined on the straight line method. 3. After 1986: the amount of additional depreciation is \$0. *** §1250(a)(1): 1. §1250 only deals with “additional depreciation.” 2. After 1986, this amount is \$0. As a result, there is no ordinary income under §1250. 3. Depreciation on any building is used to calculate the “unrecaptured §1250 gain” under §1(h)(6)(A)(ii). The resulted “unrecaptured §1250 gain” is subject to the 25% gain rate under §1(h)(1)(E). (e) §1231 – Property Used in Trade/Business and Involuntary Conversions. §1231 §1221 Similarities : 1. Flush language in §1231(b)(1) and §1221(a)(2): "Property used in trade or business" means trade/business property which are subjected to allowance for depreciation provided under §167 2. §§1231(b)(1)(A), (B) and §1221(a)(1): If property is primarily for sale to customer, it cannot be treated as capital asset. 3. §1231(b)(1)(C) and §1221(a)(3): 50
Patent, invention, model, or design…are not capital asset. 4. §1231(b)(1)(D) and §1221(a)(4): A publication of the U.S. Government is not capital asset Differences: 1. The holding period must be > 1 year 1. There is no limit about the holding period 2. §1231 gains include the gain from the sale/exchange of the depreciable property/real property used in trade or business which is NOT (A) through (D) 2.