A capital asset as defined in Section 1221 of the Internal Revenue Code (IRC) that receives favorable tax treatment upon sale contains various exclusions such as inventory, property held for resale, property used in a trade or business, certain copyrights, and specific U.S. government obligations.
Depreciation recapture refers to the process of collecting income tax on gains made through the sale of depreciable property, where deductions for accelerated depreciation exceed via recapture in accordance with Section 1250 of the Internal Revenue Code.
The Internal Revenue Code (IRC) is a comprehensive set of tax laws enacted by the United States Congress to specify how various types of income are to be taxed and what deductions are allowed. It serves as the foundation for the country's federal tax laws and is critical in shaping tax policy and administration.
The Internal Revenue Service (IRS) is the U.S. federal agency responsible for tax collection and tax law enforcement, ensuring compliance with the nation’s tax laws and providing guidance and services to taxpayers.
A reverse exchange is a strategic real estate transaction where the buyer acquires a new property before relinquishing their old property, often to meet IRS Section 1031 requirements.
Section 1031 of the Internal Revenue Code allows for tax-deferred exchanges of certain types of property, enabling the deferral of capital gains taxes under specific conditions.
Section 121 of the Internal Revenue Code pertains to the exclusion of gain from the sale of a principal residence. It provides guidelines on the criteria and limitations for income exclusion, ensuring taxpayers benefit from tax relief on qualifying property sales.
Section 1221 of the Internal Revenue Code specifies what does not constitute a capital asset, crucial for determining tax treatment of different assets.
Section 1231 of the Internal Revenue Code pertains to assets used in a trade or business. Gains on Section 1231 assets are generally taxed at capital gains rates, except for depreciation recapture, while losses are tax-deductible as ordinary income.
Section 1245 of the Internal Revenue Code (IRC) pertains to gains from the sale of depreciable personal property and mandates that depreciation recapture occurs, treating a portion of the capital gains as ordinary income.
Section 1250 is a part of the Internal Revenue Code that deals with gains from real estate where accelerated depreciation has been claimed. Although its significance has been reduced after 1986, it remains relevant for dealing with gains involved in real estate transactions.
Section 167 is the part of the Internal Revenue Code (IRC) that deals with depreciation for property, including real estate. This section provides guidelines for the allowance of depreciation deductions for tax purposes.
Section 168 of the Internal Revenue Code outlines the Accelerated Cost Recovery System (ACRS) and the Modified Accelerated Cost Recovery System (MACRS), which are methods of calculating depreciation for tax purposes.
Taxes that apply to the sale of a home, governed primarily by Section 121 of the U.S. Internal Revenue Code, which provides an exclusion on capital gains for qualifying homeowners.
