Office in Home-Sale of

[Bird Legs]

Client & wife owned and lived in home for about 4 yrs. During this time client had
an office in home-self employed. Depreciation was taken over 39yrs. MACRS-Straight Line. In 2005 client & wife sold residence and purchased a new one.
Gain on sale of residence was under the $500,000. exclusion. What about
the recapture of depreciation taken on home office, total of $900. Is this ordinary
income, on 4797, or recaptured as Sect. 1250 LTCG taxed at 25% rate?
Thanks for your help. All of you.

[Armando Beaujolais]

Client & wife owned and lived in home for about 4 yrs. During this time client had
an office in home-self employed. Depreciation was taken over 39yrs. MACRS-Straight Line. In 2005 client & wife sold residence and purchased a new one.
Gain on sale of residence was under the $500,000. exclusion. What about
the recapture of depreciation taken on home office, total of $900. Is this ordinary
income, on 4797, or recaptured as Sect. 1250 LTCG taxed at 25% rate?
Thanks for your help. All of you.

Page 6-19 of TTB has the info you're looking for. The depreciation is reported as section 1250 gain (it may be called "recapture," but technically that's not correct because "recapture" refers only to gain that must be reported as ordinary income). Likely not reported on 4797 unless the business use portion is separate from the personal use home, but is reported on Schedule D.

[Bird Legs]

Armando

Thanks a lot for your help. That is the way I reported it, Sched. D. Really
appreciate your time and effort.
I somehtimes second guess myself.

[sea-tax]

Actually I think if you look at Sch D page 2 it says " unrecaptured section 1250 gain".

[jainen]

Schedule D, line 8

Report the home sale on Schedule D, line 8, since total gain exceeds the exclusion amount. (Instructions for how to do this are in Pub 523.) ALSO report the Section 1250 gain on Schedule D, line 19. (There is a worksheet for this line in the Schedule D instrucitons.)

[Bird Legs]

Found what I was looking for

Thanks to Seatax, Jainen & Armando. Your help was & is greatly appreciated.
And, also, it will be greatly appreciated in the future.

[sea-tax]

Thanks to Seatax, Jainen & Armando. Your help was & is greatly appreciated.
And, also, it will be greatly appreciated in the future.

Your welcome . I will also point out becuae I learned this the hard way that when you take the OIH deducition make sure to remind the client that this will cause a taxable event when they sell their home. Often times clients have short term memory and when the house is sold and you tell them that they owe $700 for depreciation recapture they look at you like huh?

Good luck to you!