Question

During 2019, Paul sells residential rental property for $240,000, which he acquired in 1998 for $160,000. Paul has claimed straight-line depreciation on the building of $60,000. What is the amount and nature of Paul's gain on the sale of the rental property?

Answer 1

Answer:

$80,000 Section 1231 gain, $60,000 "unrecaptured depreciation"

Explanation:

Calculation of the amount and nature of Paul's gain on the sale of the rental property.

240,000 - 160,000 = 80,000 gain

$80,000 Section 1231 gain, $60,000 "unrecaptured depreciation"

The amount and nature of Paul's gain on the sale of the rental property will be $80,000 Section 1231 gain, $60,000 "unrecaptured depreciation" because Paul sells his residential rental property for $240,000, which was first acquired for $160,000 which is ($240,000-$160,000) making a gain of $80,000 and he has well claimed straight-line depreciation on the building of $60,000 which is the unrecaptured depreciation".