What is the difference between section 1231 and Section 1250?

Section 1231 applies to all depreciable business assets owned for more than one year, while section 1250 (and also 1245) provides guidance on how different asset categories are taxed when sold at a gain or loss.

What is a section 1231 gain?

The section 1231 law makes it so taxpayers and business owners get the best of both worlds. The IRS handles the taxation of a section 1231 gain as a "regular" capital gain when there is income, but not when there is a loss. Capital gains tax is a tax on the profit when you sell something that’s increased in value.

What are the tax advantages of Section 1231?

The tax advantages gained under section 1231 apply to both gains and losses. Under this special rule, the IRS taxes section 123 gains at the lower capital gains tax rate rather than the higher ordinary income tax rate. This provides a tax break when businesses sell big-ticket items like buildings or cars.