Thanks, Mika,
I happened to have a 2011 version of Becker REG, in which it tells the same thing as you did in your post.
– 1231 Gain = Capital, Loss = Ordinary
– 1245 Gain = Ordinary, recapture all depreciation, No 1245 Loss
– 1250 Gain = Ordinary, recapture difference between accum. depreciation and SL depreciation, NO 1250 loss.
However, in Becker REG 2014, for 1250 Gain, it distinguishes between Corp and Individual and introduces Sec 291 Depreciation. If you read the following text from Beck REG 2014, you will be confused as well regarding whether we should report Individual 1250 Gain as 1250 or 1231 Gain…
– For Corp
“Section 1250 ru les differ slightly from Section 1245 in that generally Section 1250 recaptures only that portion of depreciation taken on real property that is in excess of straight line. (Note: Generally Section 1250 only applies to assets placed into service under the pre 1987 accelerated methods of depreciation for real property. The current law requires real property to be depreciated under the straight-line method, so Section 1250 recapture rules no longe1r apply to real property.) Section 291 depreciation recapture now applies to corporations. For corporations, the total amount of the taxable recapture on real property as ordinary income under Section 291 is equal to 20 percent of the lesser of the recognized gain or the accumulated depreciation. Any gain in excess of the amount recognized as ordinary income is allowed capital gain treatment under Section 1231.”
– For Individual
“For individual taxpayers selling Section 1250 property at .a gain, the gain is characterized as a Section 1231 gain and netted with other Section 1231 gains and losses to determine if the individual taxpayer has an overall net Section 1231 gain or a net Section 1231 loss for the tax year. However, when an individual has sold a Section 1250 asset at a gain and included the gain with other Section 1231 gains, an amount equal to the lesser of (1) the recognized gain on the sale of the Section 1250 asset, or (2) the accumulated depreciation on the Section 1250 asset, is taxed at a maximum rate of 25%. Any gain in excess of the amount that will be taxed at 25 percent is taxed at the preferential rates of 0, 15, or 20 percent.”
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