Some types of livestock, coal, timber and domestic iron ore are also included.
[2] The 1954 version of the Internal Revenue Code included section 1231 covering certain property held by a business.
[4] The law was originally conceived as a way to help the shipping industry during World War II.
[citation needed] The present version of the Internal Revenue Code has retained section 1231, with the provision now applying to both property lost in an involuntary conversion, and to the sale or exchange of certain kinds of business-use property.
Gains and losses under 1231 due to casualty or theft are set aside in what is often referred to as the fire-pot (tax).
Congress has decided not to let this "best of both worlds" treatment give taxpayers undesired benefits beyond its purpose.
This treatment would compel a taxpayer to sell a Section 1231 loss asset at the end of a year to get an ordinary loss and hold a Section 1231 gain until the next taxable year to receive capital gains treatment.