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In Year 7 Standard Corp., a C corporation, sold Section 1250 property for $600,000 that had an adjusted basis of $550,000, re

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Answer) Option A ($50,000 Ordinary gain)

Rule

Section 1250 Property

The IRS defines section 1250 property as all real property, such as land and buildings, that are subject to allowance for depreciation, as well as a leasehold of land or section 1250 property.

Tax Treatment on Section 1250 Property Gains

Like section 1245 property, gains on section 1250 property is treated as ordinary income if they are less than or equal to the amount the property has depreciated, and the gains exceed the depreciation then the income is treated as capital gains. During the year of the sale, depreciation recapture is taxable as ordinary income if the sale of the property is executed in an installment method.

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