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Level 1
June 11, 2021
Question

Depreciation recapture on sale of rental property

  • June 11, 2021
  • 2 replies
  • 17 views

Sale of rental depreciation recapture.

I have entered all the sales information in the depreciation screen. I have this message in the diagnostics tab for 6 of my depreciable items: "The tax program does not support the Section 1250 recapture calculation for this asset. Manually calculate the amount and enter the result in the field "1=recapture excess over SL, 2=recapture all, 3=no recapture (or enter recapture amount)" I entered a 1 and it doesn't do anything. How do I calculate this amount?

The items were depreciated using MACRS 7 yr, 10 yr and 15 yr depreciation. Most of them have been fully depreciated.

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2 replies

Level 15
June 11, 2021

@TA8 wrote:

Sale of rental depreciation recapture.

 "The tax program does not support the Section 1250 recapture calculation for this asset.

The items were depreciated using MACRS 7 yr, 10 yr and 15 yr depreciation. Most of them have been fully depreciated.


 

I'm not a Lacerte user, but here is some tax information that may help you get on the right track...

  • The actual real estate (Section 1250 property) is usually depreciated over 27.5, 39 or 40 years, and is depreciated using Straight Line depreciation.  If straight line depreciation is used, there is no "recapture" of §1250 property (the gain due to depreciation is "Unrecaptured Section 1250 Gain").  However, see the bottom bullet point below.
  • Other items are usually Section 1245 property, and may be depreciated over a shorter time span.
  • So with that in mind, are you accidentally categorizing 1245 property (such as 7 or 15 year property) as 1250 property?  What exactly are the 7, 10 and 15 year assets?
  • In recent years there have been some tax provisions that allow Bonus Depreciation or Section 179 on some §1250 property, in which case "recapture" could apply.  But those are less common, so if that applies it would help if you explain what the assets are and if Bonus or 179 was used.
George4Tacks
Level 15
June 12, 2021
There was likely not allocation of sales price, so I have been known to cheat and change the method on the non 1250 properties to the same as the main asset.
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