Assume a building is subject to § 1250 depreciation recapture because it was acquired before 1987 and accelerated depreciation was used to depreciate it. The building is destroyed in a fire and this is the taxpayer's only casualty or theft for the year. In which of the following situations could there be a § 1250 depreciation recapture gain?
A)There is a loss because the insurance recovery is less than the adjusted basis.
B)There is a gain because the insurance recovery exceeds the adjusted basis.
C)Because of the length of time the building has been held, there is no remaining additional depreciation.
D)There is an insurance recovery, the adjusted basis of the building is zero, and straight-line depreciation was used.
E)None of the above.

Question

Quizplus · Accepted Answer

If the insurance recovery exceeds the adjusted basis, there is a gain, and § 1250 depreciation recapture could apply to the portion of the gain attributable to accelerated depreciation.

Assume a Building Is Subject to § 1250 Depreciation Recapture