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:
Item | Details |
|---|---|
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.
