TaxGuyBill
Level 15

1250 gain is not part of 1231 gain, so the 1231 gain should not be reduced.

For example, let' say some real estate was purchased for $100,000, they took $5,000 in depreciation and it was sold for $120,000.  In that scenario, there is $20,000 of 1231 gain (not $25,000).