During the current year, Hugo sells equipment for $150,000. The equipment cost $175,000 when placed in service two years ago, and $55,000 of depreciation deductions were allowed. The results of the sale are

Question

Quizplus · Accepted Answer

The equipment is subject to Sec. 1245 recapture rules. The depreciation taken was $55,000, and the gain on sale is $30,000 ($150,000 sale price - $120,000 adjusted basis). The gain is recaptured as ordinary income under Sec. 1245 up to the amount of depreciation taken.

During the Current Year, Hugo Sells Equipment for $150,000