Depreciation Recapture refers to the portion of taxable capital gain from the sale of an asset, which represents the depreciation previously deducted for that asset.
Excess (accelerated) depreciation refers to the accumulated difference between accelerated depreciation claimed for tax purposes and what straight-line depreciation would have been. Generally, excess accelerated depreciation is recaptured as ordinary income upon a sale, instead of receiving more favorable capital gains treatment.
Personal property, also known as personalty, refers to movable items that are not attached to real estate and can include goods used in trade or business. Gains on the sale of personal property may be taxed favorably under Section 1231 of the Internal Revenue Code.
Recapture is the process of taxing at ordinary rates the portion of the gain on a sale that represents prior depreciation allowances or prior tax credits, thereby increasing the taxable income of the seller.
Section 1231 of the Internal Revenue Code deals with assets used in a trade or business, providing for capital gains treatment on gains and ordinary loss treatment on losses from such assets.
