Gain/Loss & Recapture: Gain/Loss, Sec 1231, 1245/1250 Recapture
Gain/Loss & Recapture: Gain/Loss, Sec 1231, 1245/1250 Recapture is a critical concept in EA Exam Part 2, Property Transactions. This topic covers essential tax principles that frequently appear on the exam. Understanding gain/loss, sec 1231, 1245/1250 recapture is crucial for passing Part 2.
Quick answer
Business property gain/loss questions test Section 1231, and depreciation recapture under Sections 1245 and 1250. Net 1231 gains are generally long-term capital gains, while recapture converts part of the gain to ordinary income.
Gain/Loss, Sec 1231, 1245/1250 Recapture is tested on EA Exam Part 2 (Property Transactions). Primary IRS reference: IRC §1231.
About this EA exam topic
Business property gain/loss questions test Section 1231, and depreciation recapture under Sections 1245 and 1250. Net 1231 gains are generally long-term capital gains, while recapture converts part of the gain to ordinary income.
The EA exam tests the 1245 full-recapture rule for personal property and the 1250 rules for real property, plus the 1231 netting and lookback.
What you'll be tested on
- Section 1231 netting and capital-gain treatment
- Section 1245 depreciation recapture (ordinary income)
- Section 1250 recapture for real property
- The 1231 lookback rule
How to prepare
- Recapture first (ordinary), then 1231 treatment on the remainder.
- Remember 1245 recaptures all prior depreciation as ordinary.
- Know the 1231 five-year lookback for prior losses.
Practice questions for Gain/Loss, Sec 1231, 1245/1250 Recapture
What this topic covers
Gain/Loss, Sec 1231, 1245/1250 Recapture appears in Part 2: Business Taxation within the Property Transactions domain. VantageEA practice questions focus on how gain/loss & recapture rules are applied in realistic EA exam fact patterns.
What candidates practice
Candidates practice identifying tested facts, choosing the best multiple-choice answer, and reviewing explanations tied to IRC §1231, IRC §1245, IRC §1250, IRS Publication 544. This topic supports timed 100-question PSI-style mock tests and shorter topic review sessions.
Related practice-question themes include section-1231, recapture, 1245, 1250.
Topic overview
Official IRS sources
Related keywords
Frequently asked questions
What does depreciation recapture do?
It converts gain attributable to prior depreciation into ordinary income under §1245 (personal property) or §1250 (real property).
Which part?
Part 2 (Businesses).
Reference?
IRS Publication 544.
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