MN dhawk Posted March 9, 2008 Report Share Posted March 9, 2008 New client bought farm in 1980 for 72k. Depreciated 30k of the 72k over 19 yrs for drainage tile. Sold to his brother in 2007 for 240k, which he says is a fair price. Collected 20k down pmt and no other pmts in 2007. Is the 30k recaptured as sec 1250 all in 2007? Can he use the installment method with his brother? Thanks in advance. Dennis Quote Link to comment Share on other sites More sharing options...
OldJack Posted March 9, 2008 Report Share Posted March 9, 2008 If the land was used as farming it would be sec. 1250 property subject to reporting on form 4797 flowing from installment sale form 6252. Form 4797 gain is not recapture as ordinary income on MACRS depreciation of sec 1250 property, but ACRS depreciation gain is recaptured as ordinary income (19 year depreciation is ACRS). If there is recapture of gain from depreciation that portion is fully taxable in the sale year regardless of actual payments received (see form 6252). Such sale could be treated as an installment sale but if the relative sells the property before the end of the term of the installment the taxpayer may have to recognize the relative's sale price as his sale price. See publication 537, page 6. Quote Link to comment Share on other sites More sharing options...
MN dhawk Posted March 10, 2008 Author Report Share Posted March 10, 2008 Thanks for that great help. Quote Link to comment Share on other sites More sharing options...
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