Capital Gain Want to make sure

[arlo]

TB 6-13 is confusing as to what is capital gain and ordinary income.

My Client sold residential rental property and only the gain above depreciation allowed is a capital gain the rest is ordinary income.
I just want to make sure my thinking is correct.

[Rapid Robert]

TB 6-13 is confusing as to what is capital gain and ordinary income.

My Client sold residential rental property and only the gain above depreciation allowed is a capital gain the rest is ordinary income.
I just want to make sure my thinking is correct.

Are you talking about Sec 1250 or Sec 1245 property?

If talking about Sec 1250, it is highly unlikely that you have any depreciation recapture to deal with. The portion of the gain that is attributable to prior depreciation gets a special tax rate (max 25%) but it is still capital gain.

From TTB:

"Gain that is treated as capital gain is not depreciation recapture, even if the gain is attributable to prior depreciation deductions."

The only thing "confusing" is that the phrase "unrecaptured Sec 1250 gain" makes some folks erroneously think there is recapture going on.

[arlo]

Capital Gain Want to make sure

I am trying to determine if Rental property when sold is 1250 or 1245. TB 6-13 has a chart for form 4797. it shows sale of Residential Rental Property
should be reported on Part III. is has (1250) shown. Does that mean it is 1250 property?

[Roland Slugg]

Residential rental property is §1250 property.