Arthur Kamlet wrote:
- quote -

It's not the result that's weird; I think the result is "as
it should be," which is what we're both saying. I think
it's weird that the result is there in the Code at all!!

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Stuart A. Bronstein wrote:
- quote -

That's only the first part of section 1250(b)(3); see below
for ... [in Paul Harvey's voice] "The Rest of the Story...."

- quote -

Stu: You've got to read to the *end* of your citations!
Specifically, the last sentence in section 1250(b)(3) -
which you've quoted above, but only in part - is as follows:

"For purposes of the preceding sentence, if the taxpayer can
establish by adequate records or other sufficient evidence
that the amount allowed as a deduction for any period was
less than the amount allowable, the amount taken into
account for such period shall be the amount allowed."

The amount *allowed* - if it can be proven - is subject to
the "unrecaptured section 1250 gain" taxation. And if it's
zero, i.e. the taxpayer didn't claim the depreciation he was
entitled to, then there's no "unrecapture recapture." But
the basis is reduced, under the general rules, and there's
gain to be either excluded under section 121 or taxed. But
if it's taxed, it's not taxed as "unrecaptured section 1250
gain."

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"LoTax" <lotax[at]hotmail.com> wrote:
- quote -

Not that weird.

Had you claimed it when you should have, you could have
taken an ordinary income deduction on Sch E for it.

By allowing the exclusion now, it is subject to capital
gains income tax rate and year(s) later.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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"LoTax" <lotax[at]hotmail.com> wrote:
- quote -

Unfortunately that doesn't appear to be correct.

Section 121(d)(6) says,

"Subsection (a) shall not apply to so much of the gain from
the sale of any property as does not exceed the portion of
the depreciation adjustments (as defined in section 1250
(b)(3)) attributable to periods after May 6, 1997, in
respect of such property."

So then you have to go look at 1250(b)(3). It says,

"The term "depreciation adjustments" means, in respect of
any property, all adjustments attributable to periods after
December 31, 1963, reflected in the adjusted basis of such
property on account of deductions (whether in respect of the
same or other property) allowed or allowable...."

So there's that "allowed or allowable" language again.

Damn!

I suppose one solution would be to say that the cat slept on
your chair so the space wasn't used "solely and exclusively"
for business. But would that have other undesirable
consequences?

Stu

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Bill Brown wrote:
- quote -

But, weirdness of weirdness, the depreciation that *wasn't*
claimed, that should have been, although it does reduce
basis, is *not* *ineligible* for exclusion under section
121, which it would have been (ineligible) if it had been
claimed....

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mikeres[at]gmail.com wrote:

- quote -

Yes, this is one time an IRS publication is correct. Basis
is reduced by depreciation allowed or ALLOWABLE. It's in the
code.

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mikeres[at]gmail.com wrote:

- quote -

Yes it is correct. Subchapter O, Part II of the Internal
Revenue Code tells you that when you compute your capital
gain or loss your adjusted basis includes depreciation
allowed or allowable.

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I just came across something on the IRS web site that
relates to depreciating your house if you use it (or a
portion thereof) as a Home Office.

The IRS web site says that "if you do not claim depreciation
on that part of your home that is a home office, you are
still required to reduce the basis of your home for the
allowable depreciation of that part of your home that is a
home office when reporting the sale of your home."

I have looked through Pub. 587 (Business Use of Your Home),
but could not find a reference that supports the IRS view.
Can this be right??

The actual quote on the IRS web site can be found here:

--------- From the IRS Web Site ---------
Frequently Asked Tax Questions And Answers - Keyword: Home Office
http://www.irs.gov/faqs/faq-kw84.html

I have a home office. Can I deduct expenses like mortgage,
utilities, etc., but not deduct depreciation so that when I
sell this house, the basis won't be affected?

If you qualify to deduct expenses for the business use of
your home, you can claim depreciation for the part of your
home that is a home office. Generally, the part of your home
that is a home office is depreciated over a recovery period
of 39 years using the straight line method of depreciation
and a mid-month convention. If you do not claim depreciation
on that part of your home that is a home office, you are
still required to reduce the basis of your home for the
allowable depreciation of that part of your home that is a
home office when reporting the sale of your home. For more
information, refer to Publication 587, Business Use of Your
Home.

References:

* Publication 946, How to Depreciate Property
* Publication 544, Sales and Other Dispositions of Assets
* Publication 587, Business Use of Your Home
--------- From the IRS Web Site ---------

Thanks,
Mike R.

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