Sec. 1.1245-3 Definition of section 1245 property.

The term "section

property" means any property (other than livestock excluded by the effective date limitation in subparagraph (4) of this paragraph) which is or has been property of a character subject to the allowance for depreciation provided in section

and which is either:

If property is section

property under a subdivision of subparagraph (1) of this paragraph, a leasehold of such property is also section

property under such subdivision. Thus, for example, if A owns personal property which is section

property under subparagraph (1)(i) of this paragraph, and if A leases the personal property to B, B's leasehold is also section

property under such provision. For a further example, if C owns and leases to D for a single lump-sum payment of $100,000 property consisting of land and a fully equipped factory building thereon, and if 40 percent of the fair market value of such property is properly allocable to section

property, then 40 percent of D's leasehold is also section

property. A leasehold of land is not section

property.

(3) Even though property may not be of a character subject to the allowance for depreciation in the hands of the taxpayer, such property may nevertheless be section 1245 property if the taxpayer’s basis for the property is determined by reference to its basis in the hands of a prior owner of the property and such property was of a character subject to the allowance for depreciation in the hands of such prior owner, or if the taxpayer’s basis for the property is determined by reference to the basis of other property that in the hands of the taxpayer was property of a character subject to the allowance for depreciation, or if the taxpayer’s basis for the property is determined under section 1022 and such property was of a character subject to the allowance for depreciation in the hands of the decedent. Thus, for example, if a father uses an automobile in his trade or business during a period after December 31, 1961, and then gives the automobile to his son as a gift for the son’s personal use, the automobile is section 1245 property in the hands of the son.

(4) Section 1245 property includes livestock, but only with respect to taxable years beginning after December 31, 1969. For purposes of section 1245, the term "livestock" includes horses, cattle, hogs, sheep, goats, and mink and other furbearing animals, irrespective of the use to which they are put or the purpose for which they are held.

Tangible personal property (as defined in paragraph (c) of section

, relating to the definition of "section

property" for purposes of the investment credit), and

(2) Intangible personal property.

The term "property described in section

" means tangible property of the requisite depreciable character other than personal property (and other than a building and its structural components), but only if there are adjustments reflected in the adjusted basis of the property (within the meaning of paragraph (a)(2) of section

) for a period during which such property (or other property):

The language used in subparagraph (1) (i) and (ii) of this paragraph shall have the same meaning as when used in paragraph (a) of section

, and the terms "building" and "structural components" shall have the meanings assigned to those terms in paragraph (e) of section

.