Recapture of depreciation

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  • FREDNH
    Junior Member
    • Jan 2020
    • 6

    #1

    Recapture of depreciation

    Taxpayers purchased a home in 1991 and used 1/7 as a home office. On 12/31/94, the taxpayers bought a new home and stopped using the old home entirely. Through December 31, 1994,the total depreciation on the home office was $22,000. In December, 2024 the taxpayers sold the old residence. The adjusted basis of the old home, setting aside the depreciation was $430,000. Since the depreciation was incurred prior to 1997, when the depreciation recapture rule came into effect, do the taxpayers have to reduce the basis by the $22,000 depreciation, or is the basis the $430,000.
  • TaxGuyBill
    Senior Member
    • Oct 2013
    • 2321

    #2
    The Basis is still reduced by depreciation.

    The 1997 rule says that the pre-1997 depreciation CAN be excluded by the $250,000/$500,000 exclusion. But because it was no longer your client's Principal Residence, that does not apply to your situation.

    Comment

    • Snaggletooth
      Senior Member
      • Jun 2005
      • 3314

      #3
      TaxBuyBill is this recapture section 1245 or section 1250? There can be a difference.

      Comment

      • TaxGuyBill
        Senior Member
        • Oct 2013
        • 2321

        #4
        They said depreciation on the Home Office, which would result in Unrecaptured Section 1250 Gain.

        Comment

        • Kram BergGold
          Senior Member
          • Jun 2006
          • 2112

          #5
          The depreciation reduces the basis.

          Comment

          • vmowry758
            Junior Member
            • Aug 2016
            • 2

            #6
            Look at IRC 121 business use of home for an office.

            Comment

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