26 U.S.C. § 1231
If-
such gains and losses shall be treated as long-term capital gains or long-term capital losses, as the case may be.
If-
such gains and losses shall not be treated as gains and losses from sales or exchanges of capital assets.
For purposes of this subsection-
The term "section 1231 gain" means-
The term "section 1231 loss" means any recognized loss from a sale or exchange or conversion described in subparagraph (A).
For purposes of this subsection-
shall be treated as losses from a compulsory or involuntary conversion.
this subsection shall not apply to such conversion (whether resulting in gain or loss) if during the taxable year the recognized losses from such conversions exceed the recognized gains from such conversions.
For purposes of this section-
The term "property used in the trade or business" means property used in the trade or business, of a character which is subject to the allowance for depreciation provided in section 167, held for more than 1 year, and real property used in the trade or business, held for more than 1 year, which is not-
Such term includes timber, coal, and iron ore with respect to which section 631 applies.
Such term includes-
Such term does not include poultry.
In the case of an unharvested crop on land used in the trade or business and held for more than 1 year, if the crop and the land are sold or exchanged (or compulsorily or involuntarily converted) at the same time and to the same person, the crop shall be considered as "property used in the trade or business."
The net section 1231 gain for any taxable year shall be treated as ordinary income to the extent such gain does not exceed the non-recaptured net section 1231 losses.
For purposes of this subsection, the term "non-recaptured net section 1231 losses" means the excess of-
For purposes of this subsection, the term "net section 1231 gain" means the excess of-
For purposes of this subsection, the term "net section 1231 loss" means the excess of-
For purposes of determining the amount of the net section 1231 gain or loss for any taxable year, the rules of paragraph (4) of subsection (a) shall apply.
26 U.S.C. § 1231
EDITORIAL NOTES
AMENDMENTS2017-Subsec. (b)(1)(C). Pub. L. 115-97 inserted "a patent, invention, model or design (whether or not patented), a secret formula or process," before "a copyright".2014-Subsec. (c)(2)(A). Pub. L. 113-295 struck out "beginning after December 31, 1981" after "years".1999-Subsec. (b)(1)(C), (D). Pub. L. 106-170 substituted "section 1221(a)" for "section 1221". 1984-Subsec. (a). Pub. L. 98-369, §1001(b)(15), (e), substituted "6 months" for "1 year" wherever appearing, applicable to property acquired after June 22, 1984, and before Jan. 1, 1988. See Effective Date of 1984 Amendment note below.Pub. L. 98-369, §711(c)(2)(A)(iii), amended subsec. (a) generally, substituting pars. (1) to (4), for "If, during the taxable year, the recognized gains on sales or exchanges of property used in the trade or business, plus the recognized gains 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) of property used in the trade or business and capital assets held for more than 1 year into other property or money, exceed the recognized losses from such sales, exchanges, and conversions, such gains and losses shall be considered as gains and losses from sales or exchanges of capital assets held for more than 1 year. If such gains do not exceed such losses, such gains and losses shall not be considered as gains and losses from sales or exchanges of capital assets. For purposes of this subsection-"(1) in determining under this subsection whether gains exceed losses, the gains described therein shall be included only if and to the extent taken into account in computing gross income and the losses described therein shall be included only if and to the extent taken into account in computing taxable income, except that section 1211 shall not apply; and"(2) losses (including losses not compensated for by insurance or otherwise) upon the destruction, in whole or in part, theft or seizure, or requisition or condemnation of (A) property used in the trade or business or (B) capital assets held for more than 1 year shall be considered losses from a compulsory or involuntary conversion.In the case of any involuntary conversion (subject to the provisions of this subsection but for this sentence) arising from fire, storm, shipwreck, or other casualty, or from theft, of any property used in the trade or business or of any capital asset held for more than 1 year, this subsection shall not apply to such conversion (whether resulting in gain or loss) if during the taxable year the recognized losses from such conversions exceed the recognized gains from such conversions."Subsec. (b)(1), (4). Pub. L. 98-369, §1001(b)(15), (e), substituted "6 months" for "1 year", applicable to property acquired after June 22, 1984, and before Jan. 1, 1988. See Effective Date of 1984 Amendment note below.Subsec. (c). Pub. L. 98-369, §176(a), added subsec. (c). 1981-Subsec. (b)(1)(D). Pub. L. 97-34 substituted "paragraph (5)" for "paragraph (6)". 1978-Subsec. (b)(1)(D). Pub. L. 95-600 added subpar. (D).1976-Subsecs. (a), (b)(1), (4). Pub. L. 94-455, §1402(b)(2), provided that "9 months" would be changed to "1 year" wherever appearing.Pub. L. 94-455, §1402(b)(1)(R), provided that in subsecs. (a), first and last sentences, (a)(2), and (b)(1), (4), "6 months" would be changed to "9 months" for taxable years beginning in 1977.1969-Subsec. (a). Pub. L. 91-172, §516(b), provided that casualty (or theft) losses with respect to depreciable property and real estate used in trade or business and capital assets held for the production of income as well as personal assets are to be consolidated with casualty (or theft) gains with respect to this type of property and if the casualty losses exceed the casualty gains, the net loss is treated as an ordinary loss without regard to whether there may be noncasualty gains under this section, but, if the casualty gains exceed the casualty losses, the net gain is treated as a gain under this section and must be consolidated with other gains and losses under this section. Subsec. (b)(1)(C). Pub. L. 91-172, §514(b)(2), inserted reference to a letter or memorandum.Subsec. (b)(3). Pub. L. 91-172, §212(b)(1), redesignated existing provisions as subpar. (B) and added subpar. (A).1964-Subsec. (b)(2). Pub. L. 88-272 inserted reference to iron ore in text, and to domestic iron ore in heading.1958-Subsec. (a). Pub. L. 85-866 inserted provision respecting casualty losses sustained upon certain uninsured property.
STATUTORY NOTES AND RELATED SUBSIDIARIES
EFFECTIVE DATE OF 2017 AMENDMENT Amendment by Pub. L. 115-97 applicable to dispositions after Dec. 31, 2017, see section 13314(c) of Pub. L. 115-97, set out as a note under section 1221 of this title.
EFFECTIVE DATE OF 2014 AMENDMENT Amendment by Pub. L. 113-295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113-295, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1999 AMENDMENT Amendment by Pub. L. 106-170 applicable to any instrument held, acquired, or entered into, any transaction entered into, and supplies held or acquired on or after Dec. 17, 1999, see section 532(d) of Pub. L. 106-170, set out as a note under section 170 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT Pub. L. 98-369, div. A, title I, §176(b), July 18, 1984, 98 Stat. 709, provided that: "The amendment made by subsection (a) [amending this section] shall apply to net section 1231 gains for taxable years beginning after December 31, 1984."Amendment by section 711(c)(2)(A)(iii) of Pub. L. 98-369 applicable to taxable years beginning after Dec. 31, 1983, see section 711(c)(2)(A)(v) of Pub. L. 98-369, set out as a note under section 165 of this title.Amendment by section 1001(b)(15) of Pub. L. 98-369 applicable to property acquired after June 22, 1984, and before Jan. 1, 1988, see section 1001(e) of Pub. L. 98-369, set out as a note under section 166 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT Amendment by Pub. L. 97-34 applicable to property acquired and positions established by the taxpayer after June 23, 1981, in taxable years ending after such date, and applicable when so elected with respect to property held on June 23, 1981, see section 508 of Pub. L. 97-34, set out as an Effective Date note under section 1092 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT Pub. L. 95-600, title VII, §701(ee)(2), Nov. 6, 1978, 92 Stat. 2924, provided that: "The amendment made by paragraph (1) [amending this section] shall apply with respect to sales, exchanges, and contributions made after October 4, 1976."
EFFECTIVE DATE OF 1976 AMENDMENT Pub. L. 94-455, title XIV, §1402(b)(1), Oct. 4, 1976, 90 Stat. 1731, provided that the amendment made by that section is effective with respect to taxable years beginning in 1977.Pub. L. 94-455, title XIV, §1402(b)(2), Oct. 4, 1976, 90 Stat. 1732, provided that the amendment made by that section is effective with respect to taxable years beginning after Dec. 31, 1977.
EFFECTIVE DATE OF 1969 AMENDMENT Pub. L. 91-172, title II, §212(b)(2), Dec. 30, 1969, 83 Stat. 571, provided that: "The amendments made by paragraph (1) [amending this section] shall apply to livestock acquired after December 31, 1969." Amendment by section 514(b)(2) of Pub. L. 91-172 applicable to sales and other dispositions occurring after July 25, 1969, see section 514(c) of Pub. L. 91-172, set out as a note under section 1221 of this title. Amendment by section 516(b) of Pub. L. 91-172 applicable to taxable years beginning after Dec. 31, 1969, see section 516(d)(2) of Pub. L. 91-172, set out as a note under section 1001 of this title.
EFFECTIVE DATE OF 1964 AMENDMENT Amendment by Pub. L. 88-272 applicable with respect to amounts received or accrued in taxable years beginning after Dec. 31, 1963, attributable to iron ore mined in such years, see section 227(c) of Pub. L. 88-272, set out as a note under section 272 of this title.
EFFECTIVE DATE OF 1958 AMENDMENT Pub. L. 85-866, title I, §49(b), Sept. 2, 1958, 72 Stat. 1642, provided that: "The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 1957."
- person
- The term "person" shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation.
- taxable year
- The term "taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the taxable income is computed under subtitle A. "Taxable year" means, in the case of a return made for a fractional part of a year under the provisions of subtitle A or under regulations prescribed by the Secretary, the period for which such return is made.
- taxpayer
- The term "taxpayer" means any person subject to any internal revenue tax.
- trade or business
- The term "trade or business" includes the performance of the functions of a public office.
- transaction
- The term "transaction" includes a series of transactions.