Question

When determining the amount of § 1245 recapture, all depreciation allowed or allowable is considered for recapture as ordinary income. a) True

b) False

Answer 1

It is true that § 1245 recapture considers all depreciation allowed or allowable as ordinary income, regardless of whether the taxpayer claimed it.

Step-by-step explanation:

When determining the amount of § 1245 recapture, it is indeed true that all depreciation allowed or allowable is considered for recapture as ordinary income.

This means that even if the taxpayer did not claim the depreciation they were entitled to, the IRS assumes that they did when calculating the recapture amount.

Section 1245 recapture is applied when certain depreciable property (usually tangible personal property, such as machinery and equipment), which has been depreciated, is sold or disposed of at a gain. The purpose is to recapture the depreciation deductions previously taken on the property as ordinary income, up to the amount of depreciation claimed or claimable.