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MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2342
Experience:  CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
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Recapture of Special Depreciation Allowance When you sell

Resolved Question:

Recapture of Special Depreciation Allowance

When you sell an asset in which you took the Special Depreciation Allowance before the end of it's useful life, do you have to recapture the SDA? For example, if I paid $1000 for a desk, and took $500 SDA when placed in service, then sold it two years later, you would I have to recapture the SDA? I've already read Pub 946 and the instruction for 4562, but I am still a little unclear. Can someone explain this to me in layman's terms? Thanks!
Submitted: 5 years ago.
Category: Tax
Expert:  MequonCPA replied 5 years ago.
Hi and welcome to JustAnswer:

When you sell the property you do recapture the bonus depreciation.

The depreciation will only be recaptured if there is a gain on the sale.

Ex: Purchase price, $1,000, bonus depreciation $500, regular depreciation $150, selling price $600. Basis is $350 ($1,000 - $500 - $150). Gain is $250 thus this amount of gain is taxed at ordinary income tax rates.
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