sale of rental

#4 09-04-2003, 09:13 AM

"Stuart O. Bronstein" <stu[at]lexregia.com> wrote:
- quote -

> "Dave Woods, EA" <d.woods[at]verizon.net> wrote
> > "Wcm7315" <wcm7315[at]aol.com> wrote:

> > > I've had a rental property that I've rented for 35 years.
> > > It is fully depreciated. I would like to sell it to the
> > > tenants and hold the mortgage. They would pay nothing
> > > down. I know I would report the income that I would
> > > receive each year, but someone told me that I would have
> > > to pay tax on all the depreciation taken in the year of
> > > sale. Is this true?

> > No. Your recognized gain is depreciation recapture first
> > then capital gain after you have recaptured the depreciation
> > element.

> I think his question was, is all the recaptured depreciation
> required to be recognized at once? Or is it recognized as
> it is received as with the profit portion of the sale?

The law for recognizing gain immediately for accrual
taxpayers was repealed. You only recognize gain as you
receive it.

--
David M. Woods, EA
Boston, MA 02109

Postings here are general information only and not to be
relied upon as advice.

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#3 09-04-2003, 07:57 AM

- quote -

> > No. Your recognized gain is depreciation recapture first
> > then capital gain after you have recaptured the depreciation
> > element.

> I think his question was, is all the recaptured depreciation
> required to be recognized at once? Or is it recognized as
> it is received as with the profit portion of the sale?

You are correct, Stu. That was my question. Any answers?

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#2 09-03-2003, 06:23 AM

"Dave Woods, EA" <d.woods[at]verizon.net> wrote
- quote -

> "Wcm7315" <wcm7315[at]aol.com> wrote:

> > I've had a rental property that I've rented for 35 years.
> > It is fully depreciated. I would like to sell it to the
> > tenants and hold the mortgage. They would pay nothing
> > down. I know I would report the income that I would
> > receive each year, but someone told me that I would have
> > to pay tax on all the depreciation taken in the year of
> > sale. Is this true?

> No. Your recognized gain is depreciation recapture first
> then capital gain after you have recaptured the depreciation
> element.

I think his question was, is all the recaptured depreciation
required to be recognized at once? Or is it recognized as
it is received as with the profit portion of the sale?

Stu

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

#1 09-01-2003, 10:56 AM

"Wcm7315" <wcm7315[at]aol.com> wrote:

- quote -

> I've had a rental property that I've rented for 35 years.
> It is fully depreciated. I would like to sell it to the
> tenants and hold the mortgage. They would pay nothing
> down. I know I would report the income that I would
> receive each year, but someone told me that I would have
> to pay tax on all the depreciation taken in the year of
> sale. Is this true?

No. Your recognized gain is depreciation recapture first
then capital gain after you have recaptured the depreciation
element.

--
David M. Woods, EA
Boston, MA 02109

Postings here are general information only and not to be
relied upon as advice.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

09-01-2003, 10:56 AM

"Wcm7315" <wcm7315[at]aol.com> wrote:

- quote -

> I've had a rental property that I've rented for 35 years.
> It is fully depreciated. I would like to sell it to the
> tenants and hold the mortgage. They would pay nothing
> down. I know I would report the income that I would
> receive each year, but someone told me that I would have
> to pay tax on all the depreciation taken in the year of
> sale. Is this true?

It's probably worse than that. Let's say:

Purchase price: $ 300,000
Depreciation taken: (300,000)
------------
Your basis: 0
Sale price: 1,200,000
------------
Taxable capital gain: $ 1,200,000
============

Since that mortgage would be a negotiable financial
instrument, you have constructive receipt of the taxable
capital gain at a discounted rate. I suggest that you
RUN (do not walk, stroll, or meander) to a local tax pro.

Dick

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#-1 08-31-2003, 08:01 PM

I've had a rental property that I've rented for 35 years.
It is fully depreciated. I would like to sell it to the
tenants and hold the mortgage. They would pay nothing
down. I know I would report the income that I would
receive each year, but someone told me that I would have
to pay tax on all the depreciation taken in the year of
sale. Is this true?

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

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