Which of the following would extinguish the § 1245 recapture potential?
A)An exchange of depreciable business equipment for like-kind business equipment with gain realized but not recognized.
B)A nontaxable incorporation under § 351.
C)A nontaxable contribution to a partnership under § 721.
D)A nontaxable reorganization.
E)None of these.

Question

Quizplus · Accepted Answer

Section 1245 recapture potential is not extinguished by any of the listed transactions. These transactions generally defer recognition of gain, rather than eliminate it, meaning the § 1245 recapture potential remains until an actual taxable event occurs that does not qualify for deferral or non-recognition treatment.

Which of the Following Would Extinguish the § 1245 Recapture