Section 1231 Gain or Loss

Section 1231 Gain or Loss

A net section 1231 gain is treated as long-term capital gain and a net section 1231 loss is treated as an ordinary (fully deductible) loss.
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Consider further the situation where the manufacturer sustains a section 1231 gain or loss on the sale of equipment used in fulfilling the contract, and the cost-plus contract provides that such gain or loss is to be taken into account in determining the net amount due.