Section 1231 Assets

Question 1

What is depreciation recapture?

Answer 1

-Recharacterizes gains as ordinary income

Question 2

What is Section 1245 recapture?

Answer 2

• Recharacterizes gains on personalty as ordinary income to extent of accumulated deprecation
• Same for corporations and individuals

Question 3

What is Section 1250 recapture?

Answer 3

-Recapture of accumulated accelerated deprecation on buildings in excess of straight line as ordinary income

Question 4

For buildings owned by individuals, how do we treat the accumulated straight line depreciation?

Answer 4

-As eligible for a special 25% tax rate

Question 5

Does recapture recharacterize losses?

Answer 5

No

Question 6

How do you calculate Section 291 recapture for buildings for corporations?

Answer 6

Section 1245 recapture IF property had been 1245 property
-Actual Section 1250 recapture
Excess amount x 20%

Question 7

How do we treat Section 1231 gains and losses?

Answer 7

• Net all 1231 gains and losses
• Net 1231 gains treated as LTCGs
• Net 1231 losses treated os ordinary losses
• Lookback provision: Section 1231 gains must be offset by previous 5 years Section 1231 losses recapturing these gains as ordinary income