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January 23, 2025
Question

Have been showing depreciation on a property on prior returns. I sold the property.To report capital gains, do I use the property cost used for calculating depreciation?

  • January 23, 2025
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    1 reply

    KrisD15
    January 23, 2025

    Yes, to report Capital Gain AND Depreciation Recapture.

    Capital gain alone will be based on the "Adjusted Basis" which is the original bases less the depreciation. 

    Whatever your basis (or cost) was, should have been what you used for depreciation.

     

    When sold, Depreciation Recapture is first reported and claimed as Ordinary (personal) income.

    Any amount over that is Capital Gain.

     

    If you split cost between land and building, only the building would have been depreciated. You can allocate the sales proceeds between the building and land based on the same percentage you used when it was placed into service. 

     

    Remember that you must recapture depreciation regardless of whether it was reported (taken) or not. 

     

     

     

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