Don't overlook these!
Updated for 2012
When you sell Section 1231 property at a gain, part of the gain that is equal to depreciation allowed (or allowable) must be reported as ordinary gain as opposed to capital gain.
The rule for reporting recaptured depreciation as ordinary gain is as follows:
Depreciation allowed is what you actually claimed. Depreciation allowable is what you could have claimed using a proper depreciation method.
To illustrate depreciation recapture:
What you need to do:
The $3,000 portion of the gain that exceeds depreciation recaptured may or may not receive long-term capital gain treatment.
Whether the entire $3,000 receives long-term capital gain treatment depends on whether any nonrecaptured net Section 1231 losses of the previous five years exist.
Computing a Net Section 1231 Gain and Loss-Continued: Nonrecaptured Net Section 1231 Losses
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