Question

Disregarding land value, Vanessa purchased a residential rental building on November 12, 2014 for $276,000. She sold the building on May 19, 2019 for $395,000. The allowable depreciation on the property was $45,159. The sale of the building falls under which section of the Internal Revenue Code? Section 1231 gain of $164,159. Section 1245 gain of $45,159; and Section 1231 gain of $119,000. Unrecaptured Section 1250 gain of $164,159. Unrecaptured Section 1250 gain of $45,159; and Section 1231 gain of $119,000.

Answer 1

Cost	276,000
Less :Allowable Depreciation	45,159
Adjusted Basis	$ 230,841
Sales price	395,000
Less: Adjusted Basis	230,841
Total Gain	$ 164,159
Uncaptured Section 1250 gain	$ 45,159	t o the extent of depreciation claim
Balance Section 1231 gain	$ 119,000	( 1641,59 - 45,159 )
Correct answer is option 4 (i.e. Unrecaptured Section 1250 gain of $45,159; and Section 1231 gain of $119,000. )