WHY DEPRECIATION RECAPTURE
01.Core Concepts
• Depreciation is a form of capital recovery. • Ideally, depreciation = actual economic decline in value of asset. • For tax purposes, depreciation follows a set schedule, regardless of actual decline in value. • When an asset is sold: • Depreciation is recaptured first, to represent the excess of depreciation taken greater than the actual economic decline, if any • Then, Section 1231 applies.