Commerc.Building, Depreciation PRE/NA 15 yrs

[Gretel]

OK, all confusion gone. Thanks.

[Burke]

Sorry about that. The fact that it says "15 years" indicates it was ACRS, which was the default method in place in 1982. Straight-Line on a commercial building would have been at least 20-25 years or more, meaning it still would have been depreciating in the year 2000, as it would have run until at least 2002. Since you say it was already fully depreciated in 2000, it could not have been straight-line method. Maribeth's response is correct. 1245 prop.

[Gretel]

In your OP, you state "depreciation schedule shows 15 yrs ACRS Pre/NA." What depreciation schedule? If there is a current one in the file or return that shows this, the bldg would have been totally depreciated by 1997. When sold, entire cost recovery amount comes in as ordinary income under ACRS.

Well, my OP did not say anything about ACRS, since at time of posting I was not not that this only can be ACRS. 10 years I started to do tax returns for this client and I had a depreciation schedule from 2000 with this building already fully depreciated. I entered the very same information in my tax program, which was 15 yrs Pre/NA.

I read TTB and Pub. 946 but since I could not figure out which method this depreciation was I had to ask for help.

After all responses I still don't know if this depreciation detail shows if it was straight line or accelerated depreciation. Snag, my thinking was already along those line of declaring this straight line depreciation.

Anyway, I appreciate any comment I got on this issue.

[Burke]

In your OP, you state "depreciation schedule shows 15 yrs ACRS Pre/NA." What depreciation schedule? If there is a current one in the file or return that shows this, the bldg would have been totally depreciated by 1997. When sold, entire cost recovery amount comes in as ordinary income under ACRS.

[Nashville]

Accelerated Trap

Gretel, back then if one used anything more aggressive than straight-line, this disqualified the entire property from capital gains rates upon sale, forever. (Forever includes 2011). This would include the ENTIRE property, not just the recapture portion.

And virtually impossible to figure out because regardless of whether straight-line or accelerated methods were used, the property would be fully depreciated under either selection no later than 2001.

This is a good ethical question - if there is no way to find out, how do you report the sale? Ordinary or Capital Gains?? In conjunction with this -- if YOU don't know, do you think the IRS would know??

[ddoshan]

If you have Tax Book look on page 6-13 2nd column 1040 edition. If you have another edition just look in index for ACRS. Gives a good short summary of what is going on or how to deal with ACRS.

Maribeth is right on ...

[Maribeth]

Hmmm . . . . if this is COMMERCIAL property, not residential, and it was placed in service in 1982 and the prescribed method was used, which is accelerated and not straight-line, then .....

You have Section 1245 property, not Section 1250. ALL of the depreciation is recaptured as ordinary income.

Be definition, under ACRS, commercial property not depreciated using straight-line, is Section 1245 property.

Maribeth

[Gretel]

I have an additional general question in regards to recapturing of Sec. 1250 property.

Why does straight line depreciation not need to be recovered but accelerated depr does (at sale if fully depreciated)? What am I missing? Is there any logic to this?

[Gretel]

The method used was ACRS. Accelerated Cost Recovery System. PRE is short for Prescibed. You need to know if the straight line method was used.

Thanks, Veritas. That's just great. Let's hope that the client has some of the old tax returns AND that there is a depreciation schedule attached.

[veritas]

Pre

I need some help with a sales of a commercial building placed in service in 1982. Depreciation schedule shows: 15 yrs, PRE/NA. I didn't do taxes before 2000 and have no clue what that stands for. Therefor I cannot find out what to do with recaptured depreciation for this Sec. 1250 property. Is this an accelerated method of depreciation or straight line?

The method used was ACRS. Accelerated Cost Recovery System. PRE is short for Prescibed. You need to know if the straight line method was used.

[Gretel]

I need some help with a sales of a commercial building placed in service in 1982. Depreciation schedule shows: 15 yrs, PRE/NA. I didn't do taxes before 2000 and have no clue what that stands for. Therefor I cannot find out what to do with recaptured depreciation for this Sec. 1250 property. Is this an accelerated method of depreciation or straight line?