Section 1237 Capital Gain Opportunity

AAA

DEFINITION of 'Section 1237 Capital Gain Opportunity'

This is a specific tax credit that allows taxpayers to receive capital gains treatment on the sale of subdivided lots of land. The purpose of the Section 1237 capital gain opportunity is to allow individual taxpayers who are not real estate dealers to escape ordinary tax treatment on the sale of a sublot of land.

BREAKING DOWN 'Section 1237 Capital Gain Opportunity'

Section 1237 mandates that the lot cannot have had substantial improvements made to it, meaning any improvement that increases the value of the land by more than 10%. This includes buildings, roads and utilities of any kind. Furthermore, the property sold must have been held for at least five years (unless it was inherited), and neither it nor any other sublots can be held for sale to other customers during the year of sale.

RELATED TERMS
  1. Real Estate

    Land plus anything on it, including buildings and natural resources.
  2. Land Value

    The value of a piece of property, including both the value of ...
  3. Land

    Property or real estate, not including buildings or equipment, ...
  4. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
  5. Ordinary Income

    Income received that is taxed at the highest rates, or ordinary ...
  6. Section 1231 Property

    A tax term relating to depreciable business property that has ...
Related Articles
  1. Home & Auto

    Tips For The Prospective Landlord

    Investing in rental property can generate serious income, but there's more to it than collecting rent.
  2. Personal Finance

    Real Estate Speculation In College Towns

    Is this an investing option you should consider? Find out here.
  3. Taxes

    Tax Deductions For Rental Property Owners

    Besides creating ongoing income and capital appreciation, real estate provides deductions that can reduce the income tax on your profits.
  4. Home & Auto

    Uncover The Next Real Estate Hot Spot

    Real estate land speculation is a way to get in on a hot investment before a boom hits.
  5. Taxes

    Avoid Capital Gains Tax On Your Home Sale

    If you have property to sell and want to avoid capital gains tax, a Section 1031 exchange may be the answer.
  6. Economics

    Will North and South Korea Ever Reunite?

    North and South Korea have been divided for over six decades. Some analysts think the two countries could reunify within the next 10 years.
  7. Economics

    The Top 9 Things to Know About Hillary Clinton's Economic View

    Find out where former secretary of state and Democratic presidential candidate Hillary Clinton stands on the economy, jobs, trade and education.
  8. Economics

    Is Argentina a Socialist Country?

    Find out why it does not really make sense to call Argentina a socialist country, even though the South American nation has many socialistic tendencies.
  9. Retirement

    How do you calculate penalties on a 401(k) early withdrawal?

    Find out how to calculate the penalties on early withdrawals from your 401(k), including the impact of the additional 10% tax penalty, vesting and income tax.
  10. Term

    What is the Macro Environment?

    The macro environment is the conditions existing in an economy as a whole, rather than in a single sector or region.
RELATED FAQS
  1. Is it true that you can sell your home and not pay capital gains tax?

    It is true in most cases. When you sell your home, the capital gains on the sale are exempt from capital gains tax. Based ... Read Full Answer >>
  2. Are spousal Social Security benefits taxable?

    Your spousal Social Security benefits may be taxable, depending on your total household income for the year. About one-third ... Read Full Answer >>
  3. Where are the Social Security administration headquarters?

    The U.S. Social Security Administration, or SSA, is headquartered in Woodlawn, Maryland, a suburb just outside of Baltimore. ... Read Full Answer >>
  4. What is the Social Security tax rate?

    The Social Security tax rate is 12.4% as of 2015. Of that amount, the employee is responsible for half, or 6.2%, and the ... Read Full Answer >>
  5. What is the Social Security administration responsible for?

    The main responsibility of the U.S. Social Security Administration, or SSA, is overseeing the country's Social Security program. ... Read Full Answer >>
  6. How is Social Security tax calculated?

    The Old-Age, Survivors and Disability Insurance program, or OASDI, tax is calculated by taking a set percentage of your income ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  2. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  3. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  4. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
  5. Wedding Warrant

    A warrant that can only be exercised if the host asset, typically a bond or preferred stock, is surrendered. Until the call ...
  6. Marlboro Friday

    A reference to Friday, April 2, 1993, when Philip Morris, the maker of Marlboro cigarettes, announced that it would be cutting ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!