D. Stussy wrote:

- quote -

Now I have.


- quote -

Instead of carrying it forward, why is it not simply dealt with in the
same year the asset was disposed of?

- quote -

That, I can agree with.

-Mark Bole

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"Mark Bole" <makbo[at]pacbell.net> wrote in message news:A7WUk.9063$ZP4.2204[at]nlpi067.nbdc.sbc.com...
- quote -

You haven't read my [other] follow-up.

Instead of demolishing, if one were to sell, assume there is an amount that does need to be recaptured (as 1250 or other section
property - 1250 isn't the only recapture section). Now just because one demolished the asset and transferred the adjusted basis to
the land account doesn't mean that the depreciation that needed to be recaptured when the property was removed from service just
disappears. It still needs to be carried and accounted for on a subsequent sale.

Recapture is necessary because one depreciated faster than straight-line.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Undisclosed[at]sources.org wrote:

- quote -

I like the following quote from Paul Roberts and Brad Imsdahl in The Tax
Book published by Tax Materials Inc.:

"Is it possible to recapture something that was never captured? If you
think that's a tough question, how do you unrecapture something that
cannot be recaptured in the first place? Yes, the people who write this
stuff are serious. Imagine calling your neighbor and telling him his
cows are in the cornfield. You'll be glad to help him capture his cows,
for a fee of course. If a captured cow needs to be recaptured, you'll
waive your fee. However, if you accidentally unrecapture any of his
captured cows, your recapture fee will be set at a higher rate. As you
and your neighbor argue terms, the cows find their own way back into the
pasture. This has an analogy to taxpayer compliance issues, honest."

-Mark Bole

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Wed, 19 Nov 2008 10:19:12 EST, Mark Bole <makbo[at]pacbell.net> wrote:

- quote -

This is baby talk (or tech talk to imply knowledge) for "pay tax on
now" - correct?


Are you saying that completely
- quote -

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

removeps-groups[at]yahoo.com wrote:

- quote -

I think that is right, except the demolition cost also is added to the
basis of the land, not expensed. Contrary to what D. Stussy is saying,
I don't think the $40K of properly claimed straight line depreciation
ever shows up again on any tax form.

It doesn't make sense to me why real-type property is treated so
drastically different from personal-type when both are business use, but
I guess that's just the tax law.

-Mark Bole

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

D. Stussy wrote:
- quote -

What exactly do you mean by "recapture"? Are you saying that completely
aside from the sale of the land with its adjusted basis, you have to
make some other calculation in a current year for a structure that was
demolished years ago?

-Mark Bole

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Gil Faver wrote:

- quote -



The unrecaptured 1250 gain is the *lesser* of computed gain or
depreciation taken (the latter reduced by any recaptured gain).

If the building was demolished, there was obviously no gain on its
disposition. So I think the amount of prior depreciation that would be
taxable is zero.

It's confusing that for business-use, personal-type property,
undepreciated basis can be deducted upon abandonment (subject to
nonrecaptured 1231 loss carryover), while for similar real-type
property, the undepreciated basis is added to the basis of the land the
property was previously attached to.

-Mark Bole

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Nov 17, 7:21 pm, Mark Bole <ma...[at]pacbell.net> wrote:

- quote -

Let's say property was purchased for $200,000 (not including land).
- quote -

when you bought the property. The property is used 100% for business.

Upon demolishing the property you have to recapture the $40,000 of
depreciation, right? Suppose the act of demolishing costs $5,000.

On form 4797 for disposition of property, the cost basis is $200,000.
The net proceeds is $0. The depreciation taken is $40,000. So the
net profit is $(160,000), that is a loss of 160k.

The basis of the land is now increased by 5k to $105,000.

Is that about correct?

Or is it like this? The net gain on form 4797 is $0, but the basis of
the land is now $100,000+$160,000=$260,000. The 5k of demolition cost
is deductible expense.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"D. Stussy" <spam[at]bde-arc.ampr.org> wrote in message
news:gftde2$ei4$2[at]snarked.org...
- quote -

"Any deprecation
on the demolished structure that is subject to recapture (ordinary income
treatment) at that point in time (the demolition) is still
subject to recapture when the property is eventually sold"

it is this part that is confusing. According to Section 1250, that is not
correct. Is there another code section that applies?

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"Mark Bole" <makbo[at]pacbell.net> wrote in message news:4xqUk.11844$Ws1.4172[at]nlpi064.nbdc.sbc.com...
- quote -

Actually, ALL of the depreciation taken should end up as income (unless the asset is being sold for less than its initial cost).
The issue is how much of it ends up as ordinary income and how much as a capital gain. Remember that depreciation as it is taken
lowers the adjusted basis. An asset that is demolished (real estate) ceases to generate a depreciation deduction (since it is
"taken out of service"). Its adjusted basis gets added to the basis of the land along with the cost of demolition. Any deprecation
on the demolished structure that is subject to recapture (ordinary income treatment) at that point in time (the demolition) is still
subject to recapture when the property is eventually sold, along with any recapture caused by depreciation of the replacement
structure.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Gil Faver wrote:

- quote -


You must initially deal with this issue in the year the asset was
disposed of.


- quote -


"Recapture" can have a very precise meaning which doesn't necessarily
apply here.

There are several ways to dispose of business-use property, which
includes residential rentals. To wit: sale, abandonment, conversion to
personal use, gift, casualty, exchange, and so on. Abandonment is not
always cost-free, you frequently have to pay to get rid of something.

The amount of previously deducted depreciation that ends up included in
income in the year of disposition can vary depending gain or loss
recognized, gain or loss realized, and so on. I don't think there is a
single general rule.

-Mark Bole

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"D. Stussy" <spam[at]bde-arc.ampr.org> wrote in message
news:gfsmce$8gp$1[at]snarked.org...
- quote -

ok, as part of my ongoing education regarding depreciation recapture, how do
you mean that such depreciation must be recaptured?

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"Gil Faver" <rowdy'sboss[at]xxyz.com> wrote in message news:hWOTk.134813$Mh5.6339[at]bgtnsc04-news.ops.worldnet.att.net...
- quote -

Note: I did not say that one has to recapture it as 1250 property - but one does have to recapture it.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"D. Stussy" <spam[at]bde-arc.ampr.org> wrote in message
news:gfntra$che$2[at]snarked.org...
- quote -

You still have to recapture depreciation on a structure that no longer
exists? Based on Art's posts, and my reading of section 1250, that is
incorrect.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"Gil Faver" <rowdy'sboss[at]xxyz.com> wrote in message
news:C0GTk.29361$_Y1.6492[at]bgtnsc05-news.ops.worldnet.att.net...
- quote -

You're not getting it.

You still have to recapture depreciation actually taken (or should have been
taken).
You DON'T further depreciate the structure that was replaced.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"D. Stussy" <spam[at]bde-arc.ampr.org> wrote in message
news:gfl8pf$2rp$1[at]snarked.org...
- quote -

With respect to a structure that no longer exists, this sounds like it at
odds with Arthur's post in the other thread (unless I am still not getting
it, which could very well be the case).

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In article <gfl8ro$2s0$1[at]snarked.org> ,
D. Stussy <replies[at]newsgroups.kd6lvw.ampr.org> wrote:
- quote -


Occasionally there is grading or sewerage as part of a demolition
and a land improvement asset could be added as part of the job.

--


ArtKamlet at a o l dot c o m Columbus OH K2PZH

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"Arthur Kamlet" <kamlet[at]panix.com> wrote in message
news:gfl5mv$iag$1[at]reader1.panix.com...
- quote -

"Usually?"

When not? IRC 280B is pretty clear.

--
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"David" <dfouste[at]newsguy.com> wrote in message
news:4g3sh49nccjtr9g13f6o0hrujlc02aqf0f[at]4ax.com...
- quote -

Demolition costs get added to the LAND's basis. You still have to recapture
depreciation that you took (or should have taken) on a structure you owned,
even if it no longer exists.

- quote -

Same answer.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In article <4g3sh49nccjtr9g13f6o0hrujlc02aqf0f[at]4ax.com> ,
David <dfouste[at]newsguy.com> wrote:
- quote -


Sure. But as noted before, you have already included the cost of
the house in the basis of that property, and deductd depreciation
expense for it.

The demolition expense is usually added to the basis of the land.

So you increase basis of the property by the demolition expense.

- quote -

Yes. See above for demolition.



And starting 1/1/2009, if you try to get back your Section 121
exclusion from gain, you will have to prorate your exclusion amount.


Congress got wise to the people who operate a rental for years, then
move in for two years and exclude all gain (up to $250,000 pr taxpayer)
other than Sec 1250 depreciation.
--


ArtKamlet at a o l dot c o m Columbus OH K2PZH

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >