Tell me if I remember right about recapture and capital gain

[countrygirl2]

I've been out of college over 50 years and used to do our taxes over 20 or 30 years ago

till hubs company took over that function. So even though I've bought a lot of places,

never did the tax work on selling them.  Only reason I am now is because I may get

stressed if I can't get a handle on what we owe so trying to come up with a ball park

figure for now.

Ok, tell me if I'm correct, I netted $116 on the sale of a duplex. The basis is about

$66k, so I'm seeing LT capital gains of $50k which will be taxed at 20% is that right?

Then the depreciation on the property was almost $48k as we had it a long time, so

then we have to recapture that also and pay regular income tax on the recapture, is

that correct?

I'm not sure this is correct, just been to many years.  Yes, I'm having a CPA do our

return as we also have an LLC, this is not part of those properties as it was in another

state. 

[rangerj]

Using your example, your 50K gain is treated as part capital gain and part ordinary (gain) income. The depreciation recapture is the part that gets ordinary income treatment as the depreciation was deducted against ordinary income. The 2K of gain is treated as a "capital" gain and gets Capital gain treatment, i.e. the capital gain tax rate. Total amount TAXED 50K.

[countrygirl2]

We only show the difference between the $50k less the depreciation of $48k as capital gain? $2k? really

The $66k is the basis of cost plus improvements

The $116k is net of expenses, sale was $130k. I kept reading through all the stuff and it sounded like I had

a huge gain.  I am absolutely ecstatic, believe me. Then I read since our income is under $400k, way under it

will only be 15% on capital gains. Oh my god, what a relief, I thought we were going to owe a fortune and I

had way underpaid, and the more I read the worse it got. I was double dipping on the amount.

Thank you thank you really appreciate it. 

[rangerj]

You or A TAX PROFESSIONAL should look at the recapture rules relative to real property (IRC section 1250) in order to determine the amount of depreciation recapture. The amount of depreciation required to be recaptured gets ordinary income treatment and any amount of gain over that gets capital gain treatment. Real property, residential and commercial, get a slightly different recapture treatment than tangible personal property  (IRC section 1245). 

[countrygirl2]

I'm taking our tax info to a CPA to have it done, to many years that I haven't dug into this stuff deeply, but I just

wanted an idea. Initally I was floored what I thought we would have to pay till I dug into it more.

Thanks, I am calling this week to get an appointment.

I have my income and expenses done for our LLC. I have the separate property income and expenses done

in another state. Did a rudimentary SS schedule and know almost all of it will be taxable, but we are under

the floor for paying more on medicare next year, whew!  Have all our 1099's together. And the one for the

sale of the rental, need to go in the basement and pull out the settlement statement when we bought it in the 90's,

have the prior years international return ready and the depreciation schedule out of the tax return. Have the settlement

statement for the new property we bought.  Have the RMD info together, just need to tweek a few schedules and

double check then I'm ready to take it in, likely this week