Section 1250

Section 1250

A section of the Internal Revenue Code that the IRS uses to maximize tax revenue from depreciating assets by requiring the profit on the sale of a depreciating asset to be reported as ordinary income rather than capital gain. Because capital gains are taxed at a lower rate than most ordinary income, the IRS uses Section 1250 to make up for some of the tax revenue lost in the depreciating asset. This is called recapture of depreciation; it is assessed if the assets are sold for a price higher than their depreciated value. For example, suppose one buys a computer for $700 and, after a year, it depreciates to $600. If one then sells the computer for $650, one has recaptured $50 worth of depreciation. This $50 is taxed as ordinary income.

Section 1250

When real property is sold, gain must be recaptured as ordinary income to the extent of the depreciation claimed in excess of straight line. Section 1250 is the section of the Internal Revenue Code that requires this treatment. Also see "Recapture of Depreciation."
References in periodicals archive ?
A cost segregation study accelerates depreciation, by classifying Internal Revenue Code (IRC) Section 1250 property costs to IRC Section 1245 property.
Unrecaptured Section 1250 (included in Capital Gains) (Box 2b)
Section 1250 applies to depreciable real property and, for property purchased in or before 1986, the difference between accelerated and straight-line depreciation.
Any depreciation which results in a realized gain from a reduction in basis cannot be excluded and must be reported as unrecaptured Section 1250 gain, generally resulting in 25 percent long-term capital gain.
Section 1250 generally applies to depreciable real property (e.
Different rules of depreciation recapture apply depending upon whether property is classified as section 1250 or 1245 property.
1)The 2012 Unrecaptured Section 1250 Gain is a subset of, and is included in, the Total Capital Gain Distribution amount.
2) Unrecaptured section 1250 gain is a subset of, and included in, the total capital gain amount.
Such dual-use property also provides synergy in other ways: Gains from unrecaptured section 1250 taxed at 25%, can be deferred under section 1031.
However, the 25% capital gain rate on unrecaptured Section 1250 into the Liberty Zone, the area most affected by 9/11.
Section 1250 requires that depreciation deductions in excess of straightline be recaptured as ordinary income.
ii) in the case of gain properly taken into account after July 28, 1997, only gain from section 1250 property held for more than 18 months were taken into account.