Liquidating Farm Buisness

[Gene V]

I have a client that is in the nursery business, he wants to liquidate the business and sell all
Of the equipment and land. He paid $50,000 for the land 20 some years ago and had two pole barns build on the land. All the equipment and pole barns have been fully depreciated.

My take on the sales is as follows:

The equipment would be taxes as ordinary income. (The sales price will be below his original cost).

The pole barns will be taxes as ordinary income up to his cost-then capital gain above
His cost.

The land will be taxes at capital gain above his $50,000 cost.

Does this look right?

Thanks

[Bees Knees]

The only question I have would be the pole barns. I do not believe they would fall into the single purpose structure category, so they would either be other farm buildings, 20 year MACRS, or nonresidential real property, 39 years. Farm buildings at 20 years qualify for 150DB but do not qualify for section 179. If 150DB depreciation was claimed, depreciation recapture is taxed as ordinary income. If they were 39 year property, SL is your only choice and gain attributed to depreciation is unrecaptured section 1250 gain (25% max rate).

If they were ACRS property, it depends on whether or not you used SL or accelerated depreciation. If I remember correctly, you have ordinary income up to accelerated depreciation claimed. But if it was 15, 18, or 19 year property and Alternate ACRS was elected, you only recapture excess over SL depreciation as ordinary income.

[Gene V]

Thanks Bees Knees,
The Pole barns where 10 and 15 years 150% put in service 1991 and 1987.