Assume a Building Is Subject to § 1250 Depreciation Recapture

question 47

Multiple Choice

Assume a building is subject to § 1250 depreciation recapture because it was acquired before 1987 and accelerated depreciation was used to depreciate it. The building is destroyed in a fire 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 an insurance recovery, the adjusted basis of the building is zero, and straight-line depreciation was used.
• E)None of the above.

---

Definitions:

Current Year

Refers to the ongoing calendar or fiscal year in context, utilized for reporting, accounting, and planning purposes.

Cost of Goods Manufactured Formula

A calculation used to determine the total production cost of goods completed during a specific period.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product and considered a variable cost.

Factory Overhead

All indirect costs associated with manufacturing, such as indirect labor, maintenance, and utilities, that cannot be directly traced to specific units produced.