Final answer:
When a depreciable property is sold to a related party purchaser, the seller may have ordinary gain.
Step-by-step explanation:
The statement is true. When a property is sold to a related party purchaser and it is depreciable by the purchaser, it can result in the seller having ordinary gain. This is because the sale of depreciable property to a related party is subject to specific tax rules aimed at preventing tax avoidance or abuse.
One such rule is the related party transaction rule, which treats the gain on the sale as ordinary income rather than capital gain. This means that the seller will be taxed at their ordinary income tax rate on the gain from the sale.
For example, if a business sells a depreciable asset to its owner or a family member, any gain from the sale would be considered ordinary income and taxed accordingly.