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Depreciation

Unrecaptured Section 1250 Gain

There will always be an “unrecaptured Section 1250 gain” calculated on a disposition of the Section 1250 property. The unrecaptured Section 1250 gain will either be the depreciation allowed or allowable. Or, if there happens to be an amount on Form 4797, Page 2, Line 26g, then this amount must be subtracted from the depreciation allowed or allowable, resulting in the unrecaptured Section 1250 gain.

Section 1250 property sale example

The following details are an example of a Sale of Section 1250 property sold at a Gain:
Date in Service
01/02/06
Cost/Basis
$100,000
Method
200% DB
Life
20
Prior Depreciation
$79,079.29
Date Disposed
01/01/20
Gross Proceeds
$110,000
Depreciation Allowed
$79,079.29
Gain
$89,079.29

Additional depreciation after 1975

According to Form 4797, Line 26a instructions, additional depreciation is the excess of actual depreciation (including any 30% or 50% special depreciation allowance) over depreciation figured using the straight-line method. If there is excess depreciation to be calculated, then UltraTax CS will automatically calculate it.
tip
This calculation is outlined within the
Asset
 module, on the
Disposal
 tab, within the
Form 4797 Part III Real Property
 section.

Conclusion

The entire disposition is outlined on Form 4797, Page 2. The additional depreciation calculated = $9,079 is the ordinary gain, which is carried to Form 4797, Part II and then ultimately to Form 1040. The difference between the total gain and the additional depreciation = $80,000 is the capital gain, which is reported on Schedule D. The unrecaptured gain is calculated as $70,000 (depreciation allowed or allowable $79,079 - additional depreciation $9,079).
tip
The unrecaptured gain is calculated and reported on the
Unrecaptured Section 1250 Gain Worksheet
. This worksheet can be found in Forms View under the
DWrk
 folder on the
28% Rate Capital Gain and Sec 1250 Wrk
 tab.

This article applies to:

  • Product: UltraTax CS
  • Return type: 1040 Individual
  • Subject: Depreciation

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