Section 1237 Capital Gain Opportunity

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. Capital Gain

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

    Income received that is taxed at the highest rates, or ordinary ...
  4. Land

    Property or real estate, not including buildings or equipment, ...
  5. Land Value

    The value of a piece of property, including both the value of ...
  6. Veterans Administration

    Now a U.S. cabinet department that provides patient care, veterans' ...
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

    The Origins of the Puerto Rican Debt Crisis

    Learn why heavy bond issuance, economic decline, oppressive social spending and a declining population combined to bring about Puerto Rico's debt crisis.
  7. Taxes

    What All the Candidates’ Tax Plans Are Missing

    The presidential candidates have starkly different tax-reform proposals – but none of them gets to the real problem of America's tax system.
  8. Economics

    3 Ways Tax Haven Governments Make Money

    If the governments of tax haven countries impose little, or no, income taxes, how exactly do these nations generate revenue?
  9. Taxes

    How Are Collectibles Taxed?

    If you plan to sell collectibles, it's imperative that you know the tax implications.
  10. Investing News

    The Probability Of Hillary Clinton as President

    What are the chances that Hillary Clinton will become president of the United States?
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 Answer >>
  2. Are credit card rewards considered taxable income by the IRS?

    Learn about when the Internal Revenue Service considers the financial value of gifts received from credit card reward programs ... Read Answer >>
  3. Why Is Panama Considered a Tax Haven?

    Learn about the offshore tax haven of Panama, and discover the legal and tax structures that make Panama a premier Caribbean ... Read Answer >>
  4. Are 401(k) loans taxed?

    Generally, any money you borrow from a 401(k) account is tax exempt. This feature is one of the reasons that - for critical ... Read Answer >>
  5. Is dividend income taxable?

    Understand the laws and regulations regarding taxation of dividends, and know the rates at which dividend income is usually ... Read Answer >>
  6. Can a Limited Liability Company (LLC) issue stock?

    Learn about a limited liability company, or LLC, and if it is able to issue stock. Understand the benefits of an LLC, both ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center