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.
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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. -
TaxBuyBill is this recapture section 1245 or section 1250? There can be a difference.Comment
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They said depreciation on the Home Office, which would result in Unrecaptured Section 1250 Gain.Comment
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The depreciation reduces the basis.Comment
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Look at IRC 121 business use of home for an office.Comment
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