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A taxpayer sold his rental house for $190,000 on May 2001. The depreciation taken under ACRS was $67,840. If the taxpayer had used the straight-line method, the depreciation would have been $64,960. How much section 1250 gain did this taxpayer have when the house was sold?
a. $2,880
b. $64,960
c. $67,840
d. $110,000
Solution: The correct choice is "a."
Section 1250 deals primarily with both residential and nonresidential buildings used in a trade or business or held for investment purposes for which an accelerated depreciation method was used. It also includes intangible real property such as leases of land, buildings, or structural components. Specifically, Section 1250 property generally includes the following depreciable real property:
1. Residential rental real estate acquired before 1987.
2. Nonresidential real estate acquired before 1981.
Thus, all property acquired and placed into...