Video instructions and help with filling out and completing Can Form 4797 Charities

Instructions and Help about Can Form 4797 Charities

On corporate depreciation recapture the material in this chapter is generally basic if there is any medium material it is in brown and difficult material is in green section 291 recapture section 291 is an additional layer of depreciation recapture beyond the recapture that already exists for sections 1245 and 12 50 properties so if there's a gain on depreciable property there may be a recapture of the depreciation on that game now that section 291 is in addition to any other section 1245 and 1250 recapture that would apply section 1245 and 1250 assets are types of section 1231 assets which include land which of course we don't depreciate and depreciable personal and intangible property depreciable and personal intangible property is normally found under section 1245 and depreciable real property like buildings that sit on the land depreciable real property is normally found under Code section 1252 our periods in our history where that changes but those periods in our history tend to be older and only in very old cases cases that are going back to the 80s and 90s for example would we see 12:45 and 1250 generally apply now section 291 only applies to corporations not to partnerships and flow-through entities not to individuals the section 291 recapture rate is 20% of the lesser of the recognized gain on the sale of the depreciable property or the accumulated depreciation taken on the property to date let's do a section 291 example suppose a corporation purchases a warehouse for two hundred and fifty thousand dollars several years later the corporation sells the warehouse for three hundred and fifty thousand dollars and throughout the life of owning the corporation I'm sorry throughout the life of owning the building the warehouse they have deducted fifty thousand dollars and accumulated depreciation as of the date of the sales now the depreciation recapture for section 291 is twenty percent of the lesser of the recognized gain or the accumulated depreciation the accumulated depreciation is fifty thousand so we need to now find what the recognized gain is on the sale pause this find the recognized gain on the sale and then come back to see if it matches our answer the gain on the sale the proceeds minus the adjusted basis will be the gain on the sale now the proceeds for this warehouse is three hundred and fifty thousand the adjusted basis is comprised of two pieces it's the cost two hundred and fifty thousand and that would include the cost of additions and so forth even after the warehouse was purchased but in this case it's a fairly simple example minus the accumulated depreciation taken to date the accumulated depreciation is fifty thousand dollars so our adjust a basis in this case is two hundred thousand meaning that the recognized gain on sale is a hundred and fifty thousand dollars so we're now going to apply the 20% what is the section two ninety one recapture amount pause this take a moment find that amount and see if it matches what we have here the section 291 recapture rate is twenty percent of the lesser of the recognized gain or the accumulated depreciation the recognized gain is a hundred and fifty thousand the accumulated depreciation is fifty thousand the lesser of those two of course is fifty thousand so the recapture amount for 291 is twenty percent of fifty thousand or ten thousand dollars I hope this further adds light to section 291 recapture thank you

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