Is there depreciation recapture on sale of partnership interest?

Thus, a partner selling an interest in a partnership is required to recognize in the year of sale the gain that is attributable to that partner’s allocable share of the partnership’s inventory, accounts receivable and depreciation recapture income, regardless of the deferred timing of payment of the sales proceeds.

Does Unrecaptured Section 1250 Gain affect partnership basis?

estate asset that would generate unrecaptured Section 1250 gain). The gain or loss realized by the partner is equal to the difference between the amount realized on the sale and the outside basis of the partnership interest at the time of sale.

Is 1250 recapture a hot asset?

1250 capital gain (IRC Section 1(h)). Section 1250 is not a hot asset. result in significant ordinary income offset by a large capital loss.

What are the tax consequences of selling a partnership interest?

Because tax law views a partnership both as an entity and as an aggregate of partners, the sale of a partnership interest may result either in a capital gain or loss or all or a portion of the gain may be taxed as ordinary income.

How does recapture work on SEC 1250 real estate?

Gain from selling Sec 1250 property (real estate) is subject to recapture ­– the excess of the actual amount of depreciation previously claimed for the property over the amount of depreciation that would have been allowable under the straight-line method, limited to the gain on the sale, is taxed as ordinary income.

How is unrecaptured Section 1250 depreciation taxed?

Unrecaptured Section 1250 Depreciation – The gain is taxed at a special 25 percent capital gains rate for the portion of the gain allocated to real property to the extent depreciation on the property is not otherwise recaptured as a hot asset.

How are gains on sale of partnership interest taxed?

Partnership taxation establishes the general rule that gain on sale a partnership interest receives favorable capital gain treatment. However, gains attributable to so-called “hot assets,” which include inventory, depreciation recapture, and accounts receivable of a cash basis partnership are taxed at less favorable ordinary income rates.

How are recapture and Unrecaptured real estate gains taxed?

Recaptured and Unrecaptured Real Estate Rental Section 1250 Gain. But the amount of depreciation claimed on Sec 1250 property that is not recaptured as ordinary income under the Sec1250 recapture rules is unrecaptured section 1250 gain, and is subject to a special capital gain tax rate of 25%.

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