Section 291 answer

CPA Exam Forum REG REG Review Section 291 answer

This topic contains 2 replies, has 3 voices, and was last updated by  PistolPete 4 years, 7 months ago.

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    Whoever asked the question, here’s how it works. Section 291 relates to the sale of real property used in a trade or business, held for more than one year, acquired after 1986 sold at a gain. The ordinary income recapture portion (section 291 gain) is equal to 20 % of the depreciation taken on the property, the rest is 1231 ltcg. There is a good Yaeger video for free on Youtube. Log in to Youtube and search yeager video 1231, 1245, 1250 transactions. By the way had the property been acquired prior to 1987, the section 1250 rules apply. The section 1250 gain is figured by recomputing the acrs depreciation taken compared to straght line. The excess ACRS depreciation over S.L. is recaputured and is called 1250 gain. See this stuff is easy : – )



    Thank you so much! That helped a lot.



    Bump. I love searching google for a topic and finding a link back to A71!

    I understand Section 1245 no problem. But real estate is a little fuzzy to me. Based on the Yaeger video mentioned above, in his example the entire gain for an individual selling real estate is Section 1231 LTCG (no depreciation recapture, right?). For a corporation 20% of the depreciation is recaptured as Section 291 ordinary income. The remainder is Section 1231 LTCG.

    Is section 1250 only for assets placed in service before 1987?? I was thinking 1250 was for all real estate that isn’t 1231.

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