Section 1239 applies to property sold between related taxpayers only if the property:

Section 1239 of the Internal Revenue Code addresses the treatment of gains on the sale of depreciable property between related parties. The provision applies specifically to situations where the transferred property remains depreciable in the hands of the transferee. This means that if the transferee can continue to depreciate the asset, any gain realized on a subsequent sale of that property is treated as ordinary income rather than capital gain.

This rule is designed to prevent the avoidance of taxes through the sale of property among related parties, especially when depreciation has been previously taken by the transferor. The emphasis on the transferee's ability to depreciate the asset ensures that the tax implications are consistent and that related parties cannot exploit favorable tax treatments.

Considering this, the ability of the transferee to depreciate the property is crucial in determining whether Section 1239 applies, thus making it the correct essence of the assessment.