Level 20
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Investors & landlords

Q. Will I lose the remaining $1500 investment (undepreciated amount)?

 

A. No. You include the undepreciated amount as basis, in calculating the gain or loss. 

 

For example, let's use $2000 as carpet cost.  Let's also say the original cost of the house was $100,000 and you sold for $150,000.  At the time, you sell, you had claimed $500 of depreciation on the carpet and $25,000 on the house.    Your report  a sale price of $150,000 and a cost basis of 102,000 (100K + 2K) for a gain of $48,000.  Then you enter $25,500 (25,000 + 500) as depreciation recapture.  Your total gain is $73,500 (48,000 + 25,500) of which $25, 500 is section 1250 gain (taxed as ordinary income but not more than 25%).