Hypothetical situation that is mirroring a real-life client situation:
Purchase residence for $250k in 2006
Convert it to rental in 2009 when FMV is $150k
$20k of accumulated depreciation taken during the rental period from mid 2009 to mid 2015.
Property sold in 2015 for $200k after expenses.
Is there Unrecaptured 1250 Gain? I think not because there is no overall gain (basis for gain is $230k, basis for loss is $130k), but doesn't that mean the taxpayer is getting to deduct $20k of depreciation while the asset appreciated? Isn't the whole point of Unrecaptured 1250 Gain to even out depreciation taken with how much the value of the property has actually depreciated once that is revealed due to a sale? Does the IRS basically cut the taxpayer a break here and ignore the depreciation because he has an overall (albeit personal) loss?
Purchase residence for $250k in 2006
Convert it to rental in 2009 when FMV is $150k
$20k of accumulated depreciation taken during the rental period from mid 2009 to mid 2015.
Property sold in 2015 for $200k after expenses.
Is there Unrecaptured 1250 Gain? I think not because there is no overall gain (basis for gain is $230k, basis for loss is $130k), but doesn't that mean the taxpayer is getting to deduct $20k of depreciation while the asset appreciated? Isn't the whole point of Unrecaptured 1250 Gain to even out depreciation taken with how much the value of the property has actually depreciated once that is revealed due to a sale? Does the IRS basically cut the taxpayer a break here and ignore the depreciation because he has an overall (albeit personal) loss?
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