CH. 1
NORMAL TAXES AND SURTAXES
325
PART IV—SPECIAL RULES FOR DETERMINING GAINS AND LOSSES iilii
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CAPITAL
Sec. 1231. Property used in the trade or business and involuntary conversions. Sec. 1232. Bonds and other evidences of indebtedness. Sec. 1233. Gains and losses from short sales. Sec. 1234, Options to buy or sell. > Sec. 1235. Sale or exchange of patents. > Sec. 1236, Dealers in securities. ^ Sec. 1237. Real property subdivided for sale. ' Sec. 1238. Amortization in excess of depreciation. Sec. 1239. Gain from sale of certain property between spouses or between an individual and a controlled corporation. Sec. 1240. Taxability to employee of termination payments. Sec. 1241. Cancellation of lease or distributor's agreement.
SEC. 1231. PROPERTY USED IN THE TRADE OR BUSINESS AND INVOLUNTARY CONVERSIONS. (a) GENERAL RULE.—If, during the taxable year, the recognized
gains on sales or exchanges of property used in the trade or business, plus the recognized gains from the compulsory or involuntary conversion (as a result of destruction in whole or in part, theft or seizure, or an exercise of the povs^er of requisition or condemnation or the threat or imminence thereof) of property used in the trade or business and capital assets held for more than 6 months into other property or money, exceed the recognized losses from such sales, exchanges, and conversions, such gains and losses shall be considered as gains and losses from sales or exchanges of capital assets held for more than 6 months. If such gains do not exceed such losses, such gains and losses shall not be considered as gains and losses from sales or exchanges of capital assets. For purposes of this subsection— (1) in determining under this subsection whether gains exceed losses, the gains described therein shall be included only if and to the extent taken into account in computing gross income and the losses described therein shall be included only if and to the extent taken into account in computing taxable income, except that section 1211 shall not apply; and (2) losses upon the destruction, in whole or in part, theft or seizure, or requisition or condemnation of property used in the trade or business or capital assets held for more than 6 months shall be considered losses from a compulsory or involuntary conversion. (b)
DEFINITION OF PROPERTY U S E D IN THE TRADE OR B U S I N E S S. —
For purposes of this section— (1) GENERAL RULE.—The term "property used in the trade or business" means property used in the trade or business, of a character which is subject to the allowance for depreciation provided in section 167, held for more than 6 months, and real property used in the trade or business, held for more than 6 months, which is not— (A) property of a kind which would properly be includible in the inventory of the taxpayer if on hand at the close of the I taxable year, (B) property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business, or § 1231(b)(1)(B)
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