Which of the following creates potential § 1245 depreciation recapture and potential § 1231 gain?
A) Depreciable office furniture held more than one year and sold for more than its original cost.
B) Amortizable goodwill held more than one year and disposed of for less than its adjusted basis.
C) Land held more than one year and sold for more than was paid for it.
D) A note receivable held more than one year and sold for less than was paid for it.
E) None of the above.

Question

Quizplus · Accepted Answer

Depreciable office furniture creates potential § 1245 depreciation recapture because it is personal property used in a trade or business and has been held for more than one year. If it is sold for more than its original cost, there may be gain that is subject to recapture as ordinary income. If the office furniture is sold for less than its original cost, there will be a loss. Additionally, any gain or loss on the sale of the office furniture would be classified as § 1231 gain or loss, as the property is used in a trade or business and has been held for more than one year.

B, C, D, and E do not create potential § 1245 depreciation recapture and potential § 1231 gain. Amortizable goodwill and land are not depreciable, and a note receivable is not tangible personal property used in a trade or business.

Which of the Following Creates Potential § 1245 Depreciation Recapture