@pkcrossley, are you sure those gains are 100% section 1231 capital gain or perhaps subject to section 1245 recapture.
Section 1231 and 1245 are categories of business assets defined in the Internal Revenue Code. All property used in a trade or business is considered section 1231 property and, for taxation purposes, either section 1245 applies, depending on the property’s characteristics. Here is a brief summary of each category:
Section 1231 Property: This category applies to property (tangible personal property like furniture, fixture, machinery, computers, and equipment) that is used in a trade or business, subject to depreciation rules, and held for more than a year. When section 1231 property is sold at a gain, the amount in excess of the property’s basis and depreciation receives capital gains treatment, which generally means lower tax rates, while the amount attributed to depreciation recapture is treated as ordinary income. When section 1231 property is sold at a loss, the loss is treated as an ordinary loss and may be deducted in full against ordinary income.
Section 1245 Property: This category includes tangible and intangible assets on which a depreciation or amortization deduction has been allowed. Examples of Section 1245 property include furniture, business equipment, light fixtures, and carpeting. When section 1245 property is sold at a gain, amounts previously claimed as depreciation (allowed or allowable) are recaptured at ordinary income tax rates, and the remaining gain is taxed as 1231 capital gains.
