26 USC 1245 - Gain from dispositions of certain depreciable property

U.S Code last checked for updates: Jan 18, 2025

§ 1245.

Gain from dispositions of certain depreciable property

(a)

General rule

(1)

Ordinary income

Except as otherwise provided in this section, if section 1245 property is disposed of the amount by which the lower of—

(A)

the recomputed basis of the property, or

(B)

(i)

in the case of a sale, exchange, or involuntary conversion, the amount realized, or

(ii)

in the case of any other disposition, the fair market value of such property,

exceeds the adjusted basis of such property shall be treated as ordinary income. Such gain shall be recognized notwithstanding any other provision of this subtitle.

(2)

Recomputed basis

For purposes of this section—

(A)

In general

(B)

Taxpayer may establish amount allowed

(C)

Certain deductions treated as amortization

(3)

Section 1245 property

For purposes of this section, the term “section 1245 property” means any property which is or has been property of a character subject to the allowance for depreciation provided in section 167 and is either—

(A)

personal property,

(B)

other property (not including a building or its structural components) but only if such other property is tangible and has an adjusted basis in which there are reflected adjustments described in paragraph (2) for a period in which such property (or other property)—

(i)

was used as an integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electrical energy, gas, water, or sewage disposal services,

(ii)

constituted a research facility used in connection with any of the activities referred to in clause (i), or

(iii)

constituted a facility used in connection with any of the activities referred to in clause (i) for the bulk storage of fungible commodities (including commodities in a liquid or gaseous state),

(C)

so much of any real property (other than any property described in subparagraph (B)) which has an adjusted basis in which there are reflected adjustments for amortization under section 169, 179, 179B, 179C, 179D, 179E, 188 (as in effect before its repeal by the Revenue Reconciliation Act of 1990), 190, 193, or 194 1

 So in original. Probably should be followed by a comma.

(D)

a single purpose agricultural or horticultural structure (as defined in section 168(i)(13)),

(E)

a storage facility (not including a building or its structural components) used in connection with the distribution of petroleum or any primary product of petroleum, or

(F)

any railroad grading or tunnel bore (as defined in section 168(e)(4)).

(b)

Exceptions and limitations

(1)

Gifts

(2)

Transfers at death

(3)

Certain tax-free transactions

(4)

Like kind exchanges; involuntary conversions, etc.

If property is disposed of and gain (determined without regard to this section) is not recognized in whole or in part under section 1031 or 1033, then the amount of gain taken into account by the transferor under subsection (a)(1) shall not exceed the sum of—

(A)

the amount of gain recognized on such disposition (determined without regard to this section), plus

(B)

the fair market value of property acquired which is not section 1245 property and which is not taken into account under subparagraph (A).

(5)

Property distributed by a partnership to a partner

(A)

In general

(B)

Adjustments added back

In the case of any property described in subparagraph (A), for purposes of computing the recomputed basis of such property the amount of the adjustments added back for periods before the distribution by the partnership shall be—

(i)

the amount of the gain to which subsection (a) would have applied if such property had been sold by the partnership immediately before the distribution at its fair market value at such time, reduced by

(ii)

the amount of such gain to which section 751(b) applied.

(6)

Transfers to tax-exempt organization where property will be used in unrelated business

(A)

In general

(B)

Later change in use

(7)

Timber property

(8)

Disposition of amortizable section 197 intangibles

(A)

In general

(B)

Exception

(c)

Adjustments to basis

(d)

Application of section

(Added Pub. L. 87–834, § 13(a)(1), Oct. 16, 1962, 76 Stat. 1032; amended Pub. L. 88–272, title II, § 203(d), Feb. 26, 1964, 78 Stat. 35; Pub. L. 91–172, title II, § 212(a)(1), (2), title VII, § 704(b)(4), Dec. 30, 1969, 83 Stat. 571, 670; Pub. L. 92–178, title I, § 104(a)(2), title III, § 303(c)(1), (2), Dec. 10, 1971, 85 Stat. 501, 522; Pub. L. 94–81, § 2(a), Aug. 9, 1975, 89 Stat. 417; Pub. L. 94–455, title II, § 212(b)(1), title XIX, §§ 1901(a)(140), (b)(3)(K), (11)(D), 1906(b) (13)(A), 1951(c)(2)(C), title XXI, §§ 2122(b)(3), 2124(a)(2), Oct. 4, 1976, 90 Stat. 1546, 1787, 1793, 1795, 1834, 1840, 1915, 1917; Pub. L. 95–600, title VII, § 701(f)(3)(A), (B), (w)(1), (2), Nov. 6, 1978, 92 Stat. 2901, 2920; Pub. L. 96–223, title II, § 251(a)(2)(C), Apr. 2, 1980, 94 Stat. 287; Pub. L. 96–451, title III, § 301(c)(1), Oct. 14, 1980, 94 Stat. 1990

cite as: 26 USC 1245