Sec. 1250 recaptures gain as ordinary income to the extent of “excess” depreciation (i.e., depreciation deducted in excess of straight-line). The total gain less any depreciation recapture is Sec. 1231 gain. Since straight-line depreciation was used, there is no recapture under Sec. 1250. However, Sec. 291 requires that the amount of ordinary income on the disposition of Sec. 1250 property by corporations be increased by 20% of the additional amount that would have been ordinary income if the property had instead been Sec. 1245 property. If the building had been Sec. 1245 property the amount of recapture would have been $30,000 ($200,000 รขหโ $170,000). Thus, the Sec. 291 ordinary income is $30,000 รโ 20% = $6,000. The remaining $44,000 is Sec. 1231 gain.
You guys get that!? ๐
BEC - 75 (3x)
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FAR - 54, Sept 8
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