Order of Claim - Installment Sales

[Snaggletooth]

For installment sales of property that is mixed 1245 and 1250:

Which is true?

• Depreciation recapture for 1245 property is immediately recognized to its full extent, even though collection has not yet been realized.
• As Revenue is recognized, types of income are recognized in order. First comes section 1245 property, then section 1250 recapture to the extent of Straight Line, and finally Capital Gains.
• Neither of the above is true...

[TaxGuyBill]

All "recapture" is taxable immediately, regardless if payments have been made. That include 1245 and true "recapture" of 1250 (depreciation in excess of straight-line).

As payments are made, the Unrecaptured Section 1250 Gain (tax based on the straight-line depreciation of 1250 property) is taxed before the other capital gain of the 1250 property.

If the sale included several assets (such as some 1245 property and some 1250 property), you report them separately.

[Snaggletooth]

Great Answer Bill. Exactly the information I was hoping for. Thanks.