Section 1231 and Recapture Provisions Flashcards
If a business is disposing of depreciable and/or real property
a. Any loss is treated, as per Section 1231, as an ___________ (deductible for adjusted gross income).
ordinary loss
Gains and losses on the sale of qualified Section 1231 property are given ____________ treatment, and all such gains and losses in a tax year are netted (see exception under look-back rules in this section). 1.) If netting results in a loss, the loss is considered an ___________
2.) Section 1231 transactions are reported on IRS Form _____, Sales of Business Property.
- long-term capital gain
- ordinary loss
- 4797
Section 1245 recapture at ordinary income rates is the lesser of ________________ or ____________. Any remaining gain will usually be Section 1231 gain
- depreciation taken
- gain realized
Section 1245 property incomes all ______________ personal property, patents, copyrights, and leaseholds.
depreciable
Section 1250 prevents taxpayers from receiving benefits of both ___________and ________________ treatment and requires the recapture of ___________________.
- depreciation
- long-term capital gain
- depreciation
Gains on the sale of Section 1231 real estate attributed to straight-line depreciation
are referred to as unrecaptured Section 1250 capital gain and taxed at a maximum rate of ___%.
25%
Any long-term gain not attributable to depreciation is subject to the taxpayer’s __________________.
long-term capital gain rate
When the sale or exchange of depreciable property occurs between certain related parties, any recognized gain is treated as ___________________.
ordinary income
Look Back Rule: If a taxpayer has a net Section 1231 gain for the current year, he must report the gain as ordinary income, to the extent of any Section 1231 losses reported within the past _______taxable years.
five
