$1231 Asset with Depreciation - Real Property owned by Individual (subject to max 25% rate on unrecaptured depreciation gains) 9&10. Teton bought its warehouse for $325,000, depreciated it $25,000, and sold it for $475,000. What is the amount and character of the gain Teton (and thus Steve) reports on the sale (recall that income of sole proprietorships is taxed directly to the owner of the business)? What if: Suppose Steve's marginal ordinary tax rate is 35 percent, and he faces a preferential rate of 15 percent. What amount of tax will he pay on the gain (assuming no other asset dispositions)? $1231 Look-Back Example Suppose that Teton began business in year 1 and that it recognized a $6,000 net $1231 loss in year 1. Assume that the current year is year 6 and that Teton reports a net $1231 gain of $30,000 for the year. Teton did not recognize any $1231 gains or losses in years 25. For year 6, what would be the ultimate character of the $30,000 net $1231 gain? What if: Assume the same facts as above, except that Teton also recognized a $4,000 net $1231 loss in year 5. For year 6, what would be the ultimate character of the $30,000 net $1231 gain