[Verse 1] When you sell your business assets, there's a rule you need to know Section twelve thirty-one gives you the best of both worlds flow If you gain, it's capital treatment, lower rates upon your mind If you lose, it's ordinary deduction, leaving no money behind [Chorus] Twelve thirty-one's the golden rule, best of both worlds it's true But look back five years for net losses, they'll recapture what's due Twelve forty-five takes personal property, depreciation comes back Twelve fifty hits your real estate, but only the excess attack [Verse 2] Machinery and equipment fall under twelve forty-five's reach Every dollar you depreciated, recapture it will teach Ordinary income treatment when you sell above the base But real property's different, at a gentler twenty-five percent pace [Chorus] Twelve thirty-one's the golden rule, best of both worlds it's true But look back five years for net losses, they'll recapture what's due Twelve forty-five takes personal property, depreciation comes back Twelve fifty hits your real estate, but only the excess attack [Bridge] Related parties can't play games, section two sixty-seven's here Constructive ownership rules apply, keep family members near Attribution makes you own what spouse and children hold These anti-abuse provisions, keep transactions controlled [Verse 3] When you're dealing with your family, or entities you control The tax code sees right through the veil, it's watching every role Fifty percent ownership triggers, all the attribution rules Don't try to game the system, the IRS has all the tools [Chorus] Twelve thirty-one's the golden rule, best of both worlds it's true But look back five years for net losses, they'll recapture what's due Twelve forty-five takes personal property, depreciation comes back Twelve fifty hits your real estate, but only the excess attack [Outro] Remember these three sections when you're planning any sale Recapture and characterization, know the rules without fail
← 2 Capital Gains and Losses | 4 Nonrecognition Transactions →