16. Sections 1245 and 1250 can ultimately 1231 gain from the Section 1231 netting process. all or a portion of the Section SECTION 1245 17. Why are the machinery, furniture, autos, and acquired goodwill Section 1245 assets? 18. Is Section 1245 logical? 19. Depreciation and amortization expense are sense that some portion of gains should be treated as deductions. It makes income. 20. When does Section 1245 require analysis, before or after a gain is lumped into the Section 1231 netting process? for assets possibly to be subject to depreciation 21. An asset must be sold at a recapture. 22. Tax Geek calculation of Section 1245 recharacterized amount: [Lesser of original cost of asset OR sale price] minus adjusted basis of asset That's not how some people learn these rules. Another way is that the Section 1245 recharacterization amount is the lesser of the gain on the sale of the asset and the accumulated depreciation For his machinery example, the gain on the sale of the asset is $5,000 ($25,000 FMV minus $20,000 tax basis) and the accumulated depreciation is $10,000 ($30,000 original cost minus $20,000 tax basis). $5,000 is smaller and is the Section 1245 3 recharacterization amount (same as his answer). There is no left over" Section 1231 gain because the gain of $5,000 is all recharacterized. For the acquired goodwill example, the gain on the sale of the asset is $100,000. The accumulated amortization is $50,000. $50,000 is smaller and is the Section 1245 recharacterization amount (same as his way). The left over" $50,000 gain ($100,000 minus $50,000 recharacterization) is Section 1231 gain. SECTION 1250 23. What Section covers real property? 24. What is the good news about Section 1250 (2 things)? 25. The catch under Section 1250 is that it recaptures prior depreciation in excess of 26. How has real property been depreciated since 1986