Capital Gain Treatment

[jojanusz]

I have acquired a client who leases out engines and depreciates them. He has a couple that are completely depreciated, but decided to overhaul them and is capitalizing the cost and will sell one to his customer and the other to put back out on lease due to the fact it has increased the life of the asset for further leasing. The one he is selling will that be a short term capital gain or long term due to the additional capitialized cost this year and ordinary income on the recapture of depreciation.

Thanks.
Joe

[ChEAr$]

I have acquired a client who leases out engines and depreciates them. He has a couple that are completely depreciated, but decided to overhaul them and is capitalizing the cost and will sell one to his customer and the other to put back out on lease due to the fact it has increased the life of the asset for further leasing. The one he is selling will that be a short term capital gain or long term due to the additional capitialized cost this year and ordinary income on the recapture of depreciation.

Thanks.
Joe

What was your question?

anyway, when a unit is sold, it has just become inventory and thus ineligbile for
capital gain treatment; not that any of the units already WERE capital items since his business is leasing engines and therefore a trade or business, for schedule c or whatever.
Gee, I hope he wasn't using schedule e for rental property!

[Davc]

What was your question?

anyway, when a unit is sold, it has just become inventory and thus ineligbile for
capital gain treatment; not that any of the units already WERE capital items since his business is leasing engines and therefore a trade or business, for schedule c or whatever.
Gee, I hope he wasn't using schedule e for rental property!

Well, Harlan, I hope you never have a client that puts a rental up for sale.

I'd sell it on the 4797 using the original placed in service date. As 1231 property any gain up to the original basis will be ordinary and any excess will be taxed as capital gain.

[tilt53]

Dave, don't you think you were alittle impolite with your answer?

[Davc]

No worse than,"Gee, I hope he wasn't using schedule e for rental property!"

[ChEAr$]

Well, Harlan, I hope you never have a client that puts a rental up for sale.

I'd sell it on the 4797 using the original placed in service date. As 1231 property any gain up to the original basis will be ordinary and any excess will be taxed as capital gain.

Well, it's like this, Dave. The OP was not talking about nor asked about sale of rental
property. Rather the question involves sale of personal property that may formerly have
been rented out, like.... oh.. a tool rental business. that is a business, nor rental activity,
and if operated outside of an entity, goes to schedule c; not schedule e.

At last that's what IRS says.

[Davc]

My point was that 1231 property is not sold as "inventory". At least that's what the IRS says.