SECTION 1245: RESULTS
01.Core Concepts
AR > AB* and Gain > Depreciation AR > AB* & Gain < Depreciation AR < AB* AR = AB* If Sale Price: Gain up to the amount of depreciation taken is treated as ordinary gain under Section 1245. Gain in excess of depreciation taken is treated as capital gain under Section 1231. Section 1245 treats the gain as ordinary gain. Resulting loss is always treated as an ordinary loss. No gain or loss, no depreciation recapture, no tax consequence. Tax Consequences Too much depreciation was taken, and the asset appreciated. Too much depreciation was taken Not enough depreciation was taken Accounting estimate of depreciation equals economic reality. Resulting from Economics