Calculating Depreciation Recapture Under IRC 1245 and 1250: Minimizing Tax Through Transaction Planning

Recording of a 110-minute CPE webinar with Q&A


Conducted on Wednesday, May 27, 2015

Recorded event now available

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Program Materials

This webinar will provide a deep and detailed explanation of depreciation recapture rules, focusing on the technical calculations and planning opportunities of the recapture provisions. The speakers will explore Internal Revenue Code Sections 1245 and 1250, which set out the rules for recapture based on various types of assets.

Description

Depreciation recapture is the IRS process of recharacterizing tax on a gain that had previously provided a deduction against ordinary income. Business taxpayers often experience unexpected income tax liabilities by failing to account for depreciation recapture provisions when selling capital assets.

Depreciation recapture under IRC Sections 1245 and 1250 applies to sales of depreciable real estate, business tangible personal property, even the sale of a business. Tax advisors need to understand the recapture rules, and to be able to advise decision-makers of the tax effects of depreciation recapture on gains from asset sales, to understand the tax consequences of the sale of capital assets.

By carefully considering the recapture rules, tax advisors can reduce the negative impact of depreciation recapture through forward planning. In any tax-reduction scenario, proper calculation of the recapture provisions is critical to minimizing taxes on capital asset sale gains through timing of transactions.

Listen as our experienced panel provides a deep and practical exploration into the depreciation recapture rules of Sections 1245 and 1250, providing best practices for calculating depreciation recapture effects as a planning tool for avoiding tax.

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Outline

  1. Depreciation recapture provisions and rules
  2. Recapture against real estate
  3. Recapture against business equipment and other assets
  4. Planning opportunities
    1. Transaction timing opportunities
    2. Transaction structure
    3. Installment sales
    4. Like-kind (Section 1031) exchanges
    5. Component allocations

Benefits

The panel will provide answers to these and other key questions:

  • What are the applicable depreciation recapture rules for Sections 1245 and 1250?
  • How to prepare calculations and estimates of recapture gains recharacterized as ordinary income?
  • What planning opportunities exist to manage and reduce the tax arising from recapture?
  • What are the differences in treatment between structuring a business disposition as a stock sale vs. an asset sale?

Faculty

Michael Plaks, E.A.
Michael Plaks, E.A.

IRS Help - Michael Plaks, EA

Mr. Plaks specializes in real estate taxation and frequently teaches seminars and classes on relevant subjects. He has...  |  Read More

Michael Masri, Esq.
Michael Masri, Esq.

Chadbourne & Parke

Mr. Masri's practice focuses on tax and project finance.He counsels clients on federal income tax matters,...  |  Read More

Adam P. Mechanic
Adam P. Mechanic

Law Clerk
Chadbourne & Parke

Mr. Mechanic focuses his practice on tax matters.

 |  Read More

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