when it comes to taxation there is no difference under certain circumstances if gains on property fitting section 1231 s definition are more than the adjusted basis and amount of depreciation the income is counted as capital gains and as a result it is taxed at a lower rate than ordinary income 
the bottom linesection 1231 gains are gains from depreciable property and real property used in a business and held for more than one year such gains are considered tax friendly as they have traditionally enjoyed a favored status in the tax code net section 1231 gains for the taxable year are treated as long term capital gains but a net section 1231 loss is considered an ordinary loss 