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:

Maturation

A developmental process involving physical, behavioral, or emotional growth, typically following a natural and sequential pattern.

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Unconditioned Response

An automatic and natural response that occurs to a stimulus without the need for prior learning or conditioning.