The forms used to report a gain or loss on the sale of an asset depend on the classification of the asset being sold rather than on how the asset was used prior to sale.
Section 1202 allows for an exclusion of up to 50% of the eligible gain on the sale or exchange of qualified small business stock if held for more than one year.
The purpose of Code Sections 1245 and 1250 recapture provisions is to restrict the possibility of converting ordinary income into capital gains through use of depreciation deductions.
If the taxpayer's aggregate Section 1231 gains for the year exceed aggregate Section 1231 losses for the year,all such gains and losses are considered to be ordinary.
If the property's fair market value at the date of the gift is lower than the adjusted basis,then the property's basis for determining loss is its fair market value on that date.