Question

A taxpayer acquired a rental house several years ago for $190,000. The taxpayer sold his rental house for $190,000 in May 2018. Under an accelerated method, the taxpayer’s depreciation is $67,840. Under the S-L method, the taxpayer’s depreciation is $64,960. How much Sec. 1250 gain did this taxpayer have classified as ordinary income when the house was sold?

Answer 1

Answer:

Case 1: Assuming the taxpayer has depreciated under an accelerated method:

Book value = 190000 - 67840 = $122,160

Sale value = $190,000

Gain = 190000 - 122,160 = $67,840

Under the S-L method, the taxpayer’s depreciation is = $64,960

Excess of depreciation amount previously claimed for the property over the amount of depreciation that allowable under S-L method = 67840 - 64960 = $2,880

Amount of Sec. 1250 gain did this taxpayer have classified as ordinary income = $2,880

Case 1: Assuming the taxpayer has depreciated under an accelerated method:

Book value = 190000 - 67840 = $122,160

Sale value = $190,000

Gain = 190000 - 122,160 = $67,840

Under the S-L method, the taxpayer’s depreciation is = $64,960

Excess of depreciation amount previously claimed for the property over the amount of depreciation that allowable under S-L method = 67840 - 64960 = $2,880

Amount of Sec. 1250 gain did this taxpayer have classified as ordinary income = $2,880

Case 2: Assuming the taxpayer has depreciated under S-L method:

Excess of depreciation amount previously claimed for the property over the amount of depreciation that allowable under S-L method = 64960 - 64960 = $0

Amount of Sec. 1250 gain did this taxpayer have classified as ordinary income = $0