Update Class

[superman]

Does anyone have a good update class to go to in CA? I usually go to the NATP one but cant make any of their dates this year.

Thanks,
Superman

[Gene V]

I understand Spidell's put on a good class--never been to one myself.

http://www.caltax.com/Pages/home.aspx

[DTS]

I received this in the mail the other day. They are offering updates at 7 locations from November through January. Good speakers. 1 (800) 822-4194.

http://www.westerncpe.com/index.cfm?flash=Y&

[Y2KEA]

Try gearupdotcom. I use them anually for my CPE.

[Davc]

Personally after hearing a speaker insisting that Unrecaptured 1250 gain must be recaptured in the year of sale I quit attending GearUp seminars.

[Golden Rocket]

Is this not the case

Davc - I agree with the speaker, can you cite where this is wrong?

[joanmcq]

Your local CSTC chapter is likely putting on an update seminar too. Ours in Sacramento will be in January. Just in case there are any last minute changes to the code.

[Davc]

Davc - I agree with the speaker, can you cite where this is wrong?

Assuming you're not kidding why do you think it's called Unrecaptured 1250 gain?

Read page 8 of the 4797 instructions.


Manually fill out a 4797 and schedule D for a sale of a building that's been depreciated as 27.5 MACRS property and follow the flow.

If you end up with a number going to line 14 of the 1040 try it again.

[Nashville]

Two Different Things

Davc, I hope we're not talking two different things (or maybe I do -- then I wouldn't be so confused).

The instructions and software circumstances emphasize that there is a scant possibility of a recapture of ordinary income on s.1250 property. This would be for that portion of the recapture that is "accelerated" depreciation, and in general, such accelerated depreciation has not been allowed for purchases since 1986. The "straight line" portion is recaptured as capital gain.

I have had the impression that a change enacted in 1984 to raise revenue forbid the postponement of real estate recapture via the installment method. Spoken another way, recapture of section 1250 property (capital or ordinary) must be taken in the year of sale, and the election of installment method cannot avoid it. I hope this is what the speaker meant...

I'm confident if I'm wrong you'll let me know...

[Gary2]

It's easy to get tangled in the 1250 terminology. There's the theoretical but rare possibility of 1250 gain that must be recaptured, but there's also the special capital gains treatment (of a max rate of 25%) for "unrecaptured 1250 gains".

As I understand it, for an installment sale, any 1250 income that is subject to recapture must be recaptured in the year of sale (i.e. when first reported), but income subject to the special 1250 capital gains rate is still spread out over the life of the installment. I could be wrong - this is a Pepsi Max problem (I don't drink much coffee).

[Nashville]

Example

An example, the way I understand it:

Building purchased in 1984 prior to MACRS, for $100,000. Building is now 80% depreciated, for purposes of this example. (Which itself is unlikely since the owner had the option of depreciating over 19 yrs at the time)

Sale: $175,000
Original Purchase: $100,000
Depreciation: $80,000
Depreciation at Straight Line rate: $77,000
Acceleration portion of Depreciation: $3,000

Total Gain of all character: $155,000
Capital Gain at LTCG Rate of 15%: $75,000 (optional to defer via installment)
Recapture at Ordinary Income rates: $3,000 (forced in year of sale)
Recapture at LTCG Rate of 25%: $77,000 (forced in year of sale)

[Davc]

My original statement was:

Personally after hearing a speaker insisting that Unrecaptured 1250 gain must be recaptured in the year of sale I quit attending GearUp seminars.

Golden Rocket then said he agreed with the speaker. In this case it was not sloppy terminology because the speaker was questioned at the break and insisted that all of the depreciation on MACRS real property was recaptured in the year of sale.

[Davc]

I have had the impression that a change enacted in 1984 to raise revenue forbid the postponement of real estate recapture via the installment method. Spoken another way, recapture of section 1250 property (capital or ordinary) must be taken in the year of sale, and the election of installment method cannot avoid it.

Unrecaptured 1250 gain is by definition capital and treated as ordinary only to the extent of net unrecaptured 1231 losses for the previous 5 years. Except for this special case it is not recaptured.

[Gary2]

Recapture at LTCG Rate of 25%: $77,000 (forced in year of sale)

This is the issue in dispute. My initial take, as stated above, is that this is not forced in the year of sale.