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February 5, 2023
Question

1231 and 1250 gains

  • February 5, 2023
  • 3 replies
  • 0 views

On the property sale screen, it has blanks for ordinary gain and 1250 gain.  Does the ordinary gain number also include the 1250 gain or list them separate and combined they equal my gain on the property sale?  

 

Example

Sale price                                                                      50,000

expenses                                                                         1,000

Adjusted basis after depreciation recapture         10,000

My gain is                                                                     39,000

 

of which Ordinary income is                                   34,000

1250 Gain                                                                    5,000

 

Does the ordinary income get reflected as the total gain on the sale of 39,000?

    3 replies

    February 5, 2023

    Where are you entering this in the program?  It should walk you through things, not have you figure these things out.

     

    Is this real estate?

    Why do you think there is ordinary income?

    What was your cost (purchase price plus any improvements)?

    How much depreciation were you eligible to take?

    brian2390Author
    February 6, 2023

    adding more information:

     

    Sold commercial rental real estate for 110,400 6/15/2022

    purchase price was 75,000 on 8/1/1998

    higher of depreciation allowed or taken over the 25 years was 45,685 

     (depreciation was 1,923/year because land cost was included in error).

     

    Doing the math for the K1 I show the following:

    Sold for 110,400

    Adjusted basis  29,315 (75,000 cost less 45,685 depreciation)

    Sub-Total   81,085

    selling cost    970

    Gain           80,115

     

    on the K1 I completed I listed in box 9c  45,865 unrecaptured 1250 gain

    on the K1 I completed I listed in box 10 - net section 1231 gain 80,115

    is that correct?

     

    The second question:

    when bringing that information into my personal 1040 return

    Under the K1 information, I clicked disposed of property

     

    Sale Price              110,400

    Selling Expense           970

    Partnership Basis   29,315

     

    There are then 2 boxes

    one says ordinary gain

    the second says 1250 gain

     

    under 1250 gain I put 45,685

    for the ordinary gain do I list the complete gain on the transaction of 80,115 or subtract the 1250 gain and list 34,430 which is 80,115 less 45,685?  In other words does Turbo Tax do the math for me where the tax is

     

    1250 math 45,685  x  .10* = 4,569 (*rate is 25% less 15% already accounted for in 1231 math)

    1231 math 80,115 x .15  =  12,017

    Total                                         16,586

    or

    is the math

    1250 math 45,685 x .25 = 11,421

    1231 math 34,430 x .15 =   5,165

    Total                                       16,586

     

    I'm trying to figure out the flow through the return so I'm not double counting the gain.  I think I list the 80,115 but want to make sure.

     

    Thanks 

    February 6, 2023

    @brian2390 wrote:

     

    on the K1 I completed I listed in box 9c  45,865 unrecaptured 1250 gain

    on the K1 I completed I listed in box 10 - net section 1231 gain 80,115

    is that correct?

     

     

    The second question:

    when bringing that information into my personal 1040 return

    Under the K1 information, I clicked disposed of property

     

     

    Yes, that sounds correct.

     

    Disposed of the property?  I don't know exactly what the screen is asking, but I think it is asking if you disposed of your Partnership Interest, not any property that was already reported on the K-1.  Again, I can't be entirely sure, but I suspect that is the case so you may want to read that screen a bit more carefully.

    Rick19744
    Employee
    February 6, 2023

    Your facts don't make sense, so hopefully after addressing @AmeliesUncle questions, things will be clearer.

    But to add some commentary, the section 1250 gain is not additional gain.  This is a portion of the gain that will be subject to a 25% tax rate (unrecaptured Section 1250 gain).

    *A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.
    February 6, 2023

    those numbers don't appear to be correct unless there was personal property involved which could result in section 1245 recapture which is taxed as ordinary income. with personal property only the the sales price in excess of the original tax basis would be capital gain.  with the sale of real property  generally all depreciation taken is recaptured as 1250 gain which has special taxation any excess is capital gain