@Anonymous_ wrote:
@Opus 17 wrote:
Isn't the whole point of the safe harbor expense that the item is not an asset but an expense and doesn't have to be recaptured?
No.
See Treas. Reg. §1.263(a)-1(f)(3)(iii))
There is nothing directly about recapture in that section. But it does say that safe harbor expenses may not be capitalized. If it's not capitalized it does not add to the basis, and there is nothing to recapture from.
IRC section 1245 addresses recapture. Specifically,
(2)(A) In general the term “recomputed basis” means, with respect to any property, its adjusted basis recomputed by adding thereto all adjustments reflected in such adjusted basis on account of deductions (whether in respect of the same or other property) allowed or allowable to the taxpayer or to any other person for depreciation or amortization.
Which links to Treasury Regs https://www.law.cornell.edu/cfr/text/26/1.1245-1
In general, the term recomputed basis means the adjusted basis of property plus all adjustments reflected in such adjusted basis on account of depreciation allowed or allowable for all periods after December 31, 1961.
Property expensed under a safe harbor does not result in a recomputed basis because it is an expense, not an adjustment to basis.
But whatever.
