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When is depreciation recapture allowable and for what purposes?

When is depreciation recapture allowable and for what purposes?

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Answer #1

Depreciation recapture arises when there is gain on sale of depreciable capital asset. Generally the gain should be reported as income in the financial statements.

It is allowable when sale price of the asset exceeds the tax basis or adjusted basis. Difference beween both the amounts is recorded as depreciation recapture..

It is reported for the tax purposes and shown in IRS form 4797.

It is a tax provision that allows the IRS to collect taxes on any gain on sale of depreciable capital asset only.

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