What Is the Definition of Section 1250 in Property Law?


Quick Answer

Section 1250 of the Internal Revenue Code governs the treatment of income gained from selling business property that has depreciated, according to Investopedia. Gains on the sale of such property are treated as ordinary income for tax purposes, according to section 1250 as published by Cornell University Law School.

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Full Answer

The terms of section 1250 apply only if the property in question has never been section 1245 property, according to the Internal Revenue Service. Section 1245 properties are properties that have been limited to a depreciation allowance and used for specific purposes such as personal, agricultural or petroleum storage but are not buildings or structures.

Nonresidential real property and residential rental properties are two types of section 1250 property, states the IRS. Section 1250 treats low-income housing units differently than other property and states that their sale does not result in ordinary income from additional depreciation if held for more than 16 years and eight months.

When an owner sells section 1250 property, the depreciated amount is the basis for determining the gain, according to the IRS. Unless the seller can demonstrate that he did not take the total allowed depreciation deduction on the asset, the IRS assumes that the total allowable depreciated value is the basis price.

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