In a disposition of business assets, what is the significance of the various classifications to the seller?
From the perspective of the seller, the importance of asset allocation among capital assets, IRC section 1231 assets, and assets with ordinary income implications cannot be understated, as shown in Exhibit 2. If the seller is a C corporation, the significance of this is less because there is no individual capital gain rate to utilize. 4. What tax strategies are available for a seller to minimize the tax implications of a disposition? If the seller is involved in an asset disposition, IRC section 1031 can apply to both the realty and most of the business personalty. For example, any allocation to inventory would be nonqualifying. While the rules under section 1031 would allow the business real estate to be reinvested in commercial or even investment realty (including vacant land with or without a “build/rehab to suit” feature), the regulations impose much tighter restrictions on the rollover of the 1031 proceeds allocable to the personalty. With regard to the latter, Revenue Procedure 8
