If client sold a residental rental in 2005 which was rented for 30 years, would you need to list on 4797 fully depreciated 1245 property that was still being used in house, but basically no real value left?
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peggysioux -
I would
Meddlers, I believe I would. In fact, I have.
The answer is predicated on whether the "equipment" was depreciated separately. When I'm confronted with rental property, I aggressive target items with shorter depreciable lives so I'm not strung out with 30 years SL. I specifically ask for items like heat pumps, major appliances, etc.
Then if the property is sold, it's time to "pay the fiddler." If we've taken shorter lives under section 1245, then we recapture and don't pretend it's section 1250 property. Occasionally, there will even be a capital gains excess, but only if there is separate sale or separate accountability in the sale. Capital gains excess is common on section 1250 but rare on section 1245. -
My take on 1245
Say a carpet was depreciated over 5 years and we are in year 9. The carpet has an adjusted basis of zero. I would argue that it's FMV as part of the sale is also zero. So there is no gain or loss on that particular item. So it matters not whether you list it as part of 1250 or separately as 1245. I understand that I am not techinically correct in this approach but my bottom line is not wrong.Comment
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