Gain recognized on the sale of a Section 1245 asset is classified as ordinary income up to the amount of depreciation claimed.

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Quizplus · Accepted Answer

This is correct as per the tax laws in the United States. When a Section 1245 asset is sold, any gain that is realized is treated as ordinary income up to the amount of depreciation that was claimed on the asset. Any remaining gain is classified as capital gain. This rule only applies to Section 1245 assets and not to other types of assets.

Gain Recognized on the Sale of a Section 1245 Asset