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We had a personal home that we put on the market as a rental

home about 12.5 years ago...
We had a personal home that we put on the market as a rental home about 12.5 years ago when we moved and bought a new place.

The value of the home at the time we converted it to rental property was $97,000. We used straight line depreciation on the value of the home only for tax purposes. The land it sat on was valued at approximately $45,000 = total value of approx $137,500

We are now selling the rental property for $206,900. Will we have to pay taxes on depreciation recapture as a section 1250 property?
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Answered in 5 minutes by:
8/3/2013
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
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MyVirtualCPA :

Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

MyVirtualCPA :

How are you today?

Customer:

fine. thank you

MyVirtualCPA :

Unfortunately, when you sell property that you have depreciated, if it is sold at a gain you will have to recapture depreciation at a rate of 25%

MyVirtualCPA :

As you stated, it's a section 1250 gain

Customer:

What if you generally operated at a loss (including depreciation and interest)? We have carry forward losses of about $80,000

MyVirtualCPA :

That loss would offset any of your gain, so if you had gain after deducting those losses then that would be recaptured

Customer:

OK, that's what I thought. Thank you

MyVirtualCPA :

Ok if you would, please rate my response as "excellent"

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so that I may receive credit for assisting you today

Megan C
Megan C, Certified Public Accountant (CPA)
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Thanks, Faye for your positive rating. Please come back and visit MyVirtualCPA for any of your tax, finance, or social security needs. It was a pleasure working with you today.
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Megan C
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