Long and Short Term: Business Property Sales (2025 IRS Guide)

This guide covers “Long and Short Term” within business property sales. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 544 (2025), Sales and Other Dispositions of Assets, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Long and Short Term

Where you report a capital gain or loss depends on how long you own the asset before you sell or exchange it. The time you own an asset before disposing of it is the holding period.

If you received a Form 1099-B (or substitute statement), box 2 may help you determine whether the gain or loss is short term or long term.

Generally, if you hold a capital asset 1 year or less, the gain or loss from its disposition is short term. Report it in Part I of Form 8949 and/or Schedule D, as applicable. If you hold a capital asset longer than 1 year, the gain or loss from its disposition is generally long term. Report it in Part II of Form 8949 and/or Schedule D, as applicable.

However, certain partnership interests held in connection with the performance of services may be subject to different holding period rules. See the Instructions for Form 8949 for more information.

Table 4-1. Do I Have a Short-Term or Long-Term Gain or Loss?

These distinctions are essential to correctly arrive at your net capital gain or loss. Capital losses are allowed in full against capital gains plus up to $3,000 of ordinary income. See Capital Gains Tax Rates, later.

Holding period.

To figure if you held property longer than 1 year, start counting on the day following the day you acquired the property. The day you disposed of the property is part of your holding period.

Example.

If you bought an asset on June 17, 2024, you should start counting on June 18, 2024. If you sold the asset on June 17, 2025, your holding period is not longer than 1 year, but if you sold it on June 19, 2025, your holding period is longer than 1 year.

Patent property.

If you dispose of patent property, you are considered to have held the property longer than 1 year, no matter how long you actually held it. For more information, see Patents in chapter 2.

Inherited property.

If you inherit property, you are considered to have held the property longer than 1 year, regardless of how long you actually held it.

Installment sale.

The gain from an installment sale of an asset qualifying for long-term capital gain treatment in the year of sale continues to be long term in later tax years. If it is short term in the year of sale, it continues to be short term when payments are received in later tax years.

Tip:

The date the installment payment is received determines the capital gains rate that should be applied, not the date the asset was sold under an installment contract.

Nontaxable exchange.

If you acquire an asset in exchange for another asset and your basis for the new asset is figured, in whole or in part, by using your basis in the old property, the holding period of the new property includes the holding period of the old property. That is, it begins on the same day as your holding period for the old property.

Corporate liquidation.

The holding period for property you receive in a liquidation generally starts on the day after you receive it if gain or loss is recognized.

Profit-sharing plan.

The holding period of common stock withdrawn from a qualified contributory profit-sharing plan begins on the day following the day the plan trustee delivered the stock to the transfer agent with instructions to reissue the stock in your name.

Gift.

If you receive a gift of property and your basis in it is figured using the donor’s basis, your holding period includes the donor’s holding period. For more information on basis, see Pub. 551.

Real property.

To figure how long you held real property, start counting on the day after you received title to it or, if earlier, the day after you took possession of it and assumed the burdens and privileges of ownership.

However, taking possession of real property under an option agreement is not enough to start the holding period. The holding period cannot start until there is an actual contract of sale. The holding period of the seller cannot end before that time.

Repossession.

If you sell real property but keep a security interest in it and then later repossess it, your holding period for a later sale includes the period you held the property before the original sale, as well as the period after the repossession. Your holding period does not include the time between the original sale and the repossession. That is, it does not include the period during which the first buyer held the property.

Nonbusiness bad debts.

Nonbusiness bad debts are short-term capital losses. For information on nonbusiness bad debts, see chapter 4 of Pub. 550.

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

• Publication 544 (2025), Sales and Other Dispositions of Assets: Reporting Gains and Losses — Schedule D and Form 8949 — Long and Short Term — Internal Revenue Service; 2025 edition.

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.