Question

Which of the following statements is correct?

a. When depreciable property is inherited by a taxpayer, the depreciation recapture potential is extinguished.

b. When corporate depreciable property is distributed as a dividend, the depreciation recapture potential generally does not have any effect on the tax treatment of the dividend.

c. When depreciable property is contributed to charity, the depreciation recapture potential has no effect on the amount of the charitable contribution deduction.

d. When depreciable property is gifted to another individual taxpayer, the depreciation recapture potential is extinguished.

Answer 1

Your required answer is option A i.e. When depreciable property is inherited by a taxpayer, the depreciation recapture potential is extinguished

Explanation:

Depreciation recapture potential is extinguished for the inherited property by a taxpayer as the property is included in the estate after the death However Depreciation recapture potential is not extinguished for the gifted property.

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