Lynne owns depreciable residential rental real estate that has accumulated depreciation of $65,000 (all from straight- line) .If Lynne sold the property, she would have a $53,000 gain.The initial characterization of the gain would be:
A)Section 1245 gain.
B)Section 1231 gain.
C)Section 1250 gain.
D)Section 1239 gain.
E)None of these.

Question

Quizplus · Accepted Answer

Since the property is residential rental real estate, it is considered a section 1250 asset. Any gain resulting from the sale of this type of asset is initially characterized as section 1231 gain. Therefore, choice B is correct. Choice A would only apply if there was a recapture of depreciation under section 1245. Choice C would apply if there was additional depreciation recapture under section 1250, but this is not the initial characterization of the gain. Choice D applies to certain types of property transactions, but residential rental real estate does not fall under this category. Therefore, the best choice is B.

Lynne Owns Depreciable Residential Rental Real Estate That Has Accumulated