However corporations may have more depreciation recapture ordinary income on

However corporations may have more depreciation

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In general, the recapture rules under Sections 1245 and 1250 are equally applicable to both individual and corporate taxpayers. However, corporations may have more depreciation recapture (ordinary income) on the disposition of § 1250 property than individuals. Post-Submission Answers: $0; $57,498; $429,994; $487,492. The recapture rules under §§ 1245 and 1250 are equally applicable to both individual and corporate taxpayers. However, corporations may have more depreciation recapture (ordinary income) on the disposition of § 1250 property than individuals. Under § 291, a corporation will have additional ordinary income equal to 20% of the excess of the amount of depreciation recapture that would arise if the property was § 1245 property over the amount of depreciation recapture computed under § 1250 (without regard to § 291). As a result, the § 1231 portion of the corporation's gain on the disposition is correspondingly reduced by the additional recapture. Under § 1250, recapture is limited to the excess of accelerated depreciation over straight-line depreciation. In general, only straight-line depreciation is allowed for real property placed in service after 1986; thus, there will usually be no depreciation recapture on the disposition of § 1250 property (without regard to § 291). In contrast, all depreciation taken on § 1245 property is subject to recapture under that provision. First, determine the recognized gain: Sales price $850,000 Less adjusted basis: Cost of property $650,000 Less cost recovery (287,492) (362,508) Recognized gain $487,492 Second, determine the § 1245 recapture potential. This is the lesser of $487,492 (recognized gain) or $287,492 (cost recovery claimed).
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