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Respondent increased the corporation's taxable income by
$15,643 for section 1245 depreciation-recapture income, resulting
from the distribution of its tangible assets to the
shareholders.8 Section 1245(a)(1) provides for the recapture of
depreciation as ordinary income upon the disposition of section
1245 property. Personal property used in a trade or business is
section 1245 property. Sec. 1245(a)(3)(A). Here, the amount
recaptured is the amount by which the lower of the recomputed
basis of the property or the fair market value of such property,
exceeds the adjusted basis of the property. Sec. 1245(a)(1).
Recomputed basis means the adjusted basis of the property
recomputed by adding thereto all adjustments reflected in such
adjusted basis on account of deductions allowed or allowable to
the taxpayer for depreciation.9 Sec. 1245(a)(2)(A).
The corporation reported an adjusted basis in its tangible
assets of $59,455 on its 1992 Federal income tax return.
Respondent's experts stated that the corporation's tangible
assets, which were distributed to the shareholders and then
transferred to the partnership, had a fair market value of
8Neither party argues that any of the tangible assets of the
corporation is other than sec. 1245 property.
9Petitioners submitted a list of the tangible assets at
issue, which reflects an approximate recomputed basis of
$179,880. Because both parties contend that the fair market
value of the property is less than this amount, we rely on the
fair market value to determine any gain recognized from
depreciation recapture.
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