What are Nonrecaptured Net 1231 Losses?

Nonrecaptured Net 1231 Losses refer to losses from the sale of certain types of property, known as Section 1231 property, that have not been offset by any subsequent gains within the tax cycle. When a taxpayer realizes a loss on the sale of Section 1231 property, that loss is treated differently than ordinary losses. Specifically, if there are no subsequent gains to offset those losses in future tax years, they are classified as nonrecaptured.

The key point about these losses is that they retain their character as capital losses and remain available to offset future gains on Section 1231 property, but they cannot be recaptured as ordinary income in future transactions. This means that these losses effectively carry forward to future years and can reduce future taxable income that results from gains on Section 1231 property.

This definition is distinct from the other options presented: losses that have been recaptured typically become ordinary losses and have a different tax treatment; 1245 property losses specifically relate to a different category of asset entirely; and losses exceeding 1231 gains do not capture the essence of nonrecaptured losses as they do not emphasize the lack of offsetting gains that creates the nonrecaptured status.