Depreciation recapture on residential rental

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  • AuditorTurnedGood
    Senior Member
    • May 2008
    • 326

    #1

    Depreciation recapture on residential rental

    Ok, I'm all confused. My client just got rid of his residential rental property. Depreciation was never claimed on the property (previous accountant missed that) so I know I need to deal with depreciation "allowed or allowable". However, I'm confused on this point:

    Can Section 1231 property ALSO be section 1250 property? This seems to be the case, as section 1250 property is real property that is not and has never been section 1245 property.

    Can someone check me on this? Thanks!

    ATG
    "Congress has spoken to this issue through its audible silence."
    Anyone ever notice they beat the daylights out of the definition of a child, but they don't spend much time at all defining "parent"?
  • abby
    Senior Member
    • Jun 2005
    • 261

    #2
    yes, yes it can be both

    HI ATG

    sec 1250 deals with the TREATMENT of most sec 1231 depreciable real property sold at a gain. If the property is sold at a loss - it never 'enters' sec 1250. If the real property is MACRS - then sec 1250 is going to govern the treatment of any gain due to depreciation, as MACRS real property is never, to my knowledge, treated as sec 1245 property (some ACRS real property came under sec 1245 in the '80s)

    I know you didn't ask about this - but you can usually do a catch up depreciation, too, using Form 3115.

    Hope that helps
    Last edited by abby; 08-10-2009, 05:30 PM.

    Comment

    • solomon
      Senior Member
      • Aug 2006
      • 1012

      #3
      Originally posted by abby
      I know you didn't ask about this - but you can usually do a catch up depreciation, too, using Form 3115.
      I believe Rev. Proc. 2007-16 addresses that.

      Comment

      • OtisMozzetti
        Senior Member
        • Dec 2007
        • 530

        #4
        Some MACRS real property is treated as sec 1245

        Originally posted by abby
        MACRS real property is never, to my knowledge, treated as sec 1245 property (some ACRS real property came under sec 1245 in the '80s)
        Let's leave ACRS aside, in the past, for now. There are some examples of MACRS real property which is treated as sec 1245 property. The proverbial examples are the hog barns (single-purpose agricultural structures) and the oil storage tanks. See the asterisk under "Section 1245 Property" in TTB p. 6-13:

        "Section 1245 property also includes certain other assets used as an integral part of manufacturing, production, or extraction; or of furnishing transportation, communications, electricity, gas water, or sewage disposal services. Also includes single purpose agricultural (livestock) or horticultural structures."

        Comment

        • abby
          Senior Member
          • Jun 2005
          • 261

          #5
          you are of course, correct

          I should have been more specific - residential rental property and commercial real estate are sec 1250 property under MACRS

          Comment

          • AuditorTurnedGood
            Senior Member
            • May 2008
            • 326

            #6
            thank you all

            that is very helpful! Once again, a great, well thought out response from the members. Thanks again!

            ATG
            "Congress has spoken to this issue through its audible silence."
            Anyone ever notice they beat the daylights out of the definition of a child, but they don't spend much time at all defining "parent"?

            Comment

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