What is IRS code 1231?

IRS Code 1231 refers to a provision in the Internal Revenue Code that deals with the taxation of certain types of property transactions. Specifically, it pertains to the sale or exchange of real property and depreciable business assets held for more than one year. Gains from these transactions are generally treated as long-term capital gains, while losses can be deducted against ordinary income, offering beneficial tax treatment for businesses. This code is significant for businesses looking to optimize their tax obligations regarding asset sales.