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Character of gains and losses and installment sales
TCP Chapter 17 · Area IV · Blueprint IV.B
When a business sells an asset, the amount of gain is only half the answer; the character decides the tax. Ordinary income is taxed at up to 37%, long-term capital gain at up to 20%, unrecaptured §1250 gain at up to 25%, and a §1244 loss can be ordinary instead of capital. The Blueprint asks you to identify character, calculate §1231 gains and losses, §1245 and §1250 recapture and unrecaptured §1250 gain, §1244 losses and installment sale gain, and to review disposition schedules and software diagnostics. Tessa and Leo help Victor Lane wind down Lane Machine Shop, his sole proprietorship. Figures are for 2026.
In this chapter
- Capital, §1231 or ordinary?
- Netting §1231 gains and losses
- §1245 recapture on personal property
- §1250 property and unrecaptured §1250 gain
- §1244 small business stock losses
- Installment sales
- Reviewing the asset disposition schedule
- Resolving software diagnostics
This chapter has 8 lessons, 50 practice MCQs with explanations and 20 simulations, plus flashcards and a recall sheet.
What this chapter covers
- Realized and recognized gain
- §1231 netting and lookback
- §§1245, 1250 and 291 recapture
- unrecaptured §1250 gain
- §1244 and §1202 stock
- §453 installment sales
- reviewing disposition schedules
Chapter 16: Nontaxable dispositions · Chapter 18: Related parties and imputed interest