Section 1231 gain is a type of taxable gain from section 1231 transactions, which are defined as the sale or exchange of certain property used in a trade or business. This property can be either real or depreciable business property held for more than one year. If a gain is realized from a section 1231 transaction, it is taxed at the lower capital gains tax rate, as opposed to the rate for ordinary income. However, if there is a net loss from all section 1231 transactions, the loss is treated as an ordinary loss and can be used to offset ordinary income. The treatment of section 1231 gains and losses as ordinary or capital depends on whether there is a net gain or loss from all section 1231 transactions. If there is a net gain, it is considered ordinary income up to the amount of nonrecaptured section 1231 losses from previous years, and the remainder is long-term capital gain that can offset other capital losses from sales of non-section 1231 property.