Which of the following is true regarding depreciation recapture?
A) Changes the character of a loss.
B) Changes the character of a gain.
C) Only applies to ordinary assets.
D) Changes the amount of a gain.
E) None of the choices are correct.

Question

Quizplus · Accepted Answer

Depreciation recapture typically applies to the sale of depreciable assets that have been claimed as a deduction on taxes. It recharacterizes a portion of the gain as ordinary income rather than capital gain. This means that the gain is taxed at a higher rate than if it were classified as a capital gain. Therefore, it changes the character of a gain.

Which of the Following Is True Regarding Depreciation Recapture