Sunday, February 12, 2012

Section 1245 Property- Depreciable Property Used In Business

What is Section 1245 Property- Depreciable Property Used In Business?

A gain on the disposition of §1245 property is treated as ordinary income to the extent of depreciation allowed or allowable on the property. The gain treated as ordinary income is the lesser of:

  1. The depreciation allowed or allowable on the property. 
  2. The gain realized on the disposition (the amount realized from the disposition minus the adjusted basis of the property taking into account depreciation.)
Extent gain results from artificial depreciation deductions, § 1245 applies. The extent the gain results because the taxpayer sells the property for more than he paid for it, § 1245 does not apply

This is all taxed at the Capital Gains Rate. Any gain recognized that is more than the part that is ordinary income from depreciation is §1231 gain.

No comments:

Popular Accounting Problems

The information on this site is for informational purposes only and should not be used as a substitute for the professional advice of an accountant, tax advisor, attorney, or other professional.