Pedro sells a building for $170,000 in 2018. He paid $145,000 for the building and it had an adjusted basis of $110,000 as of the sale date.
I.If the building was purchased in 1993 and MACRS straight-line depreciation is used, $35,000 of the gain is recaptured under section 1250.
II.If the building is an apartment building purchased in 1985, only the gain which is attributable to excess depreciation is recaptured as ordinary income under Section 1250.
III.If the building was purchased in 1993, $35,000 of the gain is unrecaptured section 1250 gain, and $25,000 of the gain is a section 1231 gain.

Question

Pedro sells a building for $170,000 in 2018. He paid $145,000 for the building and it had an adjusted basis of $110,000 as of the sale date.
I.If the building was purchased in 1993 and MACRS straight-line depreciation is used, $35,000 of the gain is recaptured under section 1250.
II.If the building is an apartment building purchased in 1985, only the gain which is attributable to excess depreciation is recaptured as ordinary income under Section 1250.
III.If the building was purchased in 1993, $35,000 of the gain is unrecaptured section 1250 gain, and $25,000 of the gain is a section 1231 gain.
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Quizplus · Accepted Answer

Statement II is correct because for buildings purchased before 1987, only excess depreciation is recaptured under Section 1250. Statement III is correct because the unrecaptured Section 1250 gain is the difference between the sale price and the adjusted basis, and the remaining gain is a Section 1231 gain. Statement I is incorrect because MACRS straight-line depreciation does not result in recapture under Section 1250 for property placed in service after 1986.

Pedro Sells a Building for $170,000 in 2018