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Level 1

How do i know if business property is section 1245, 1250, 1252, 1254 or 1255?

We sold our business which included all of it's property. One item was a truck mounted carpet cleaning machine. i have entered all of the info: original cost, accumulated depreciation, etc.

When reviewing the return for errors, it asks me to check the box that applies to the property.

i don't know which one it is or where to find an explanation of each section to determine which box to check.

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Level 1

How do i know if business property is section 1245, 1250, 1252, 1254 or 1255?

Section 1245 property. This type of property includes tangible personal property, such as furniture and equipment, that is subject to depreciation, or intangible personal property, such as a patent or license, that is subject to amortization.

Section 1250 property - depreciable real property, including leaseholds if they are subject to depreciation. 

The most common examples of §1250 property are buildings and ..... deck, shingles, vapor barrier, skylights, trusses, girders, and gutters. ... of the cost of construction of the building and depreciated over the life of the building.

Section 1252 property, which is farmland held less than 10 years, on which soil, water, or land-clearing expenses were deducted

Section 1254 property, including intangible drilling and development costs, exploration costs, and costs for developing mining operations, 

Section 1255 property, which is cost-sharing payment property described in section 126 of the Internal Revenue Code

You can see from the examples that only certain section  will apply.

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Level 1

How do i know if business property is section 1245, 1250, 1252, 1254 or 1255?

Section 1245 property. This type of property includes tangible personal property, such as furniture and equipment, that is subject to depreciation, or intangible personal property, such as a patent or license, that is subject to amortization.

Section 1250 property - depreciable real property, including leaseholds if they are subject to depreciation. 

The most common examples of §1250 property are buildings and ..... deck, shingles, vapor barrier, skylights, trusses, girders, and gutters. ... of the cost of construction of the building and depreciated over the life of the building.

Section 1252 property, which is farmland held less than 10 years, on which soil, water, or land-clearing expenses were deducted

Section 1254 property, including intangible drilling and development costs, exploration costs, and costs for developing mining operations, 

Section 1255 property, which is cost-sharing payment property described in section 126 of the Internal Revenue Code

You can see from the examples that only certain section  will apply.

Level 1

How do i know if business property is section 1245, 1250, 1252, 1254 or 1255?

There is no simple answer to this unfortunately, when determining what character of gain you have when you sell a business, it is most important to determine what type of asset you are selling and what type of entity the asset was held in. The three most common categories are section 1231, 1245 and 1250 property.

Here's some main points of distinguishing between the three

  1. 1231 property are assets used in your trade or business held by you for more than one year. This could be your carpet cleaning machine for instance if it was for the sole purpose of business.
  2. 1245 property is all depreciable personal property and some other real depreciable property but not buildings or structural components
  3. 1250 property is depreciable property that is not 1245 property, in other words does not fall into the 1245 category such as a leasehold of land

These are only very basic descriptions just meant to give some idea of what each can be

The guidelines for character of sale can be confusing, the IRS has laid out a full description of each, and can help you determine what you have, I have provided a link below if you want to read into more detail

http://www.irs.gov/publications/p544/ch03.html#en_US_2013_publink100072560