Depreciation recapture calculated on disposition with gain (1040, 1120C, and 1041)

If there's a disposition of an asset, the amount of
Depreciation allowed
must be recaptured as ordinary income. The entire disposition is outlined on Form 4797, Page 2. The total gain is then broken down into ordinary income and capital gain as follows.
  • Depreciation allowed
    is the amount that must be recaptured as ordinary income and is reported on Form 4797, Part II, then transfers to Form 1040, Line 14.
  • Any remainder amounts, which is the
    Cost / Basis
    minus
    Depreciation allowed
    , is classified as a capital gain and reported on Schedule D.

error-icon

Triva isn't available right now.

Check out the support page for our phone number and hours

error-close