Can Form 4797 Deductions 2024-2025

Hello and welcome to this lecture. This is Professor Farhad. In this session, we will look at section 1245 recaptures. So, what is section 1250, not 1245? Section 1245, in concept, is very similar to section 1245. So, if you don't understand what section 1245 is, go back and review section 1245. Basically, we are recapturing depreciation as ordinary income when we sell a 1245 asset, which is personal property. Now, section 1250, in concept, is not the same. Otherwise, you will not be covering it separately. So, the government is a little bit nicer when it comes to real property. They want you to recapture with special rules on how much you are going to recapture, so depreciation recapture for section 1250 property only applies to depreciable real property. And you're going to see why that is residential rental real estate. So, residential rental real estate acquired before 1987, and you're going to see why acquired before 1987, or non-residential real estate, which is business commercial real estate acquired before 1981. And you're going to see in a moment why those dates are important. Okay, so think about it. Any property that was acquired before those dates is already fully depreciated. It only applies to those. So, section 1250 only applies, since only the amount of additional depreciation is subject to recapture. What is the additional depreciation? The additional depreciation is the additional depreciation over the straight-line. Okay, so to have additional depreciation, the property must have used some form of accelerated depreciation. I hope you learned in tax one that for real property, we use the straight-line. So, the only depreciation that we will need to recapture is the additional depreciation in excess of the straight-line. Okay, so to have additional depreciation, accelerated depreciation must have been taken on...