Friends,
I am studying for the SEE and have some confusion about disposition of assets and the use of depreciation in the adjusted basis and recapture. Pub. 544 seems clear enough: your adjusted basis is the basis less the depreciation and gain/loss is sales price less basis. Not talk here about recapture.
Pub. 946 page 50 is not so clear:
"When you dispose of property that you depreciated using MACRS, any gain on the disposition generally is recaptured (included in income) as ordinary income up to the amount of the depreciation previously allowed or allowable for the property. Depreciation, for this purpose, includes any section 179 deduction claimed on the property, any special depreciation allowance or Liberty Zone depreciation allowance available for the property (unless you elected not to claim it), and any deduction claimed for clean-fuel vehicles and clean-fuel vehicle refueling property."
My first problem with this is that depreciation allowable is not at all a well defined thing because you have various options and elections. Must you recapture any deduction you could have taken, even if you did not elect to?
My second problem is that Pub. 946 and Pub. 544 seem to give two different ways of calculating the same thing. 544 goes straightforward at the gain/loss but 946 breaks down the depreciation according to various criteria which have to be recaptured (or not) in various ways. But what is the point in calculating the gain/loss if it can't be directly used?
Regards, Bob
mrretaylor at mindspring dot com