In 1980, Mr. Lyle purchased a factory building to use in business for $480,000. When Mr. Lyle sells the building for $580,000, he has taken depreciation of $470,000. Straight- line depreciation would have been $400,000. Mr. Lyle must report

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The sale of the building results in a gain of $100,000 ($580,000 - $480,000). Since the depreciation taken ($470,000) exceeds the straight-line depreciation ($400,000), the excess depreciation of $70,000 is recaptured as ordinary income. The remaining gain of $30,000 ($100,000 - $70,000) is treated as Sec. 1231 gain.