Section 1231 assets are depreciable assets such as personal and real property used for business purposes. They do not include capital assets. These assets are also required to be held for more than a year. Property that is used to run a business, for example a restaurant has kitchen appliances like stoves and certain grills that are considered to be 1231 assets, since they help run the business. But the food in storage or meat is considered inventory and is not a 1231 asset.
Common examples of 1231 assets are:
- Depreciable real or personal property
- Livestock
- Purchased Intangible Assets, such as goodwill or patents that are amortized
Common examples that do not qualify as 1231 assets are:
- Inventory
- Accounts receivable