Property Transactions

Question 1

How are gains reported for section 1245 depreciation recapture for tangible personal property?

Answer 1

The amount up to the amount of depreciation that was taken is treated as ordinary income. Anything after that is treated as a capital gain.

Question 2

What is section 1250 depreciation recapture for real property?

Answer 2

It is the amount of the gain up to the additional depreciation taken. The additional depreciation is the difference between MACRs depreciation and straight line method.

Question 3

How is the gain from section 1250 depreciation recapture on real property treated?

Answer 3

Section 1250 gains are treated as ordinary. Any gain in excess is treated as section 1231 gain and taxed at LTCG -25% for individuals

Question 4

What is section 291 used for?

Answer 4

Corps calculate the difference b/w the amount of depreciation that was recaptured under section 1250 (additional depreciation taken) and the amount that would have been recaptured if it was treated as a section 1245 asset (all depreciation to the extent of the gain). The greater of these two is then multiplied by 20% to treat it as an ordinary gain with the rest subject to 1231.