Assume a Building Is Subject to § 1250 Depreciation Recapture

question 45

Multiple Choice

Assume a building is subject to § 1250 depreciation recapture because bonus depreciation [§ 168(k) ]was used. The building is destroyed in a hurricane and this is the taxpayer's only casualty or theft for the year. In which of the following situations could there be a § 1250 depreciation recapture gain?

• A) There is a loss because the insurance recovery is less than the adjusted basis.
• B) There is a gain because the insurance recovery exceeds the adjusted basis.
• C) Because of the length of time the building has been held, there is no remaining additional depreciation.
• D) There is no insurance recovery and the adjusted basis of the building is greater than zero.
• E) None of the above.

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Definitions:

Maxillary

Pertaining to the maxilla, the upper jawbone that forms part of the facial structure.

Lacrimal

Relating to the tears or the glands that produce tears, involved in lubricating and protecting the eye.

Mandible

The lower jawbone, which is the largest and strongest bone of the face and holds the lower teeth.

Squamous Suture

A cranial suture located between the parietal and temporal bones of the skull.