On January 1, 2008, Stephanie Bridges acquired depreciable real property for $50,000. She used straight-line depreciation to compute the asset's cost recovery. The asset was sold for $96,000 on January 3, 2017, when its adjusted basis was $38,000.

a. Assuming the property is residential real property, there is a 1231 gain of $, of which $ is treated as unrecaptured 1245 gain .

b. Stephanie is curious about how the recapture rules differ for tangible personal property and for residential rental real estate acquired in 1987 and thereafter. Write a letter to Stephanie, explaining the differences. Her address is 2345 Westridge Street #23, Edna, KS 67342.

Maloney, Hoffman, Raabe, & Young, CPAs 5191 Natorp Boulevard Mason, OH 45040

March 17, 2018

Ms. Stephanie Bridges 2345 Westridge Street #23 Edna, KS 67342

Dear Ms. Bridges:

The purpose of this letter is to answer the tax question we discussed last week. Below you will find the specific question restated and our response.

Question: What difference is there between the recapture rules for tangible personal property as opposed to residential rental real estate acquired in 1987 and thereafter?

Answer: Tangible personal property depreciation subjects any (gAIN / LOSS) on the property's disposition to be taxed as( ORDINARY INCOME / ORDINARY LOSS/ A CAPITAL GAIN / A CAPITAL LOSS) to the extent of the depreciation taken. Generally, there (IS / IS NO) depreciation recapture for residential rental real estate acquired in 1987 (and later years).

Thank you for your inquiry. If we can be of further service, please contact us.

Sincerely,

Walter Smith, CPA Tax Partner