Sec' 1250 and Sec' 1245

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Sec. 1250 and Sec. 1245

• By Margaret Dahilig
• Graciela Silva
• Geena Song

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Introduction
Section 1250 Margaret Dahilig Section
1245 Graciela Silva Other Applications Geena Song
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Section 1250The Purpose

• Established in 1964
• Additional Depreciation
• Section 1231

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Section 1250 Example P. 13-11I
Office building sold for 800,000 Purchased
for 700,000 Accelerated Depreciation
500,000 Straight-line Depreciation 420,000
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Section 1250 Example P. 13-11I
Sec. 1250 ordinary income Accelerated depr.
Straight line depr. 500,000-420,000
80,000 Sec. 1231 gain Remaining 520,000gain
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Section 1250Definition

• All other depreciable real property
• Low-income housing
• Depreciable residential rental property

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Section 1245 and Corporation Recaptures

• Graciela Silva

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Sec. 1245 Purpose

• established in 1962
• reduces Sec. 1231 advantages
• prevents
• maximum 20 tax rate
• use of capital losses

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Sec. 1245Property

• depreciable personal property and amortizable
  intangible assets
• nonresidential real estate property
• applies if placed in service after 1980 and
  before 1987
• does not apply if acquired after 1986

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Sec. 1245Recapture

• applies to assets sold or exchanged at a gain
• gain is characterized as ordinary income to the
  extent of total depreciation deductions
• gain realized gt depreciation
• Sec. 1231 treatment

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Additional Recapturefor Corporations

• Sec. 291 disposition of depreciable real
  estate
• amount of Sec. 1231 gain
• no effect on Sec. 1245 property
• (20) (Sec. 1245 amt.- Sec. 1250 amt.)

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Recapture Provisions-Other Applications

• Geena Song

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Recapture Provisions- Other Applications

• Gifts
• Transfer of property at death
• Charitable contributions

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Recapture Provisions- Other Applications

• Like-kind exchanges
• Installment sales
• Section 179 expensing election

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Recapture Provisions- Other Applications

• Conservation and land
• Intangible drilling costs and depreciation
• Gain on sale of depreciable property between
  related parties

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Conclusion

• Section 1250
• Section 1245
• Recapture for Corporations
• Recapture Provisions