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Section 179(f) Deductions and Recapture of Costs of Qualified Real Property

Journal of Taxation, Vol 120, No 4, 2014

Brooklyn Law School, Legal Studies Paper No. 295

13 Pages Posted: 8 Feb 2014 Last revised: 22 May 2014

Bradley T. Borden

Brooklyn Law School

Cali Lieberman

Independent

Date Written: February 5, 2014

Abstract

With the extension and fast-approaching expiration of the section 179 cost-expensing for qualified real property (qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property), the IRS has provided guidance for computing the deduction and accounting for the recapture of such deductions on the disposition of qualified real property. This article explains how real property costs expensed under section 179(f) result in section 1245 recapture while other gain on the sale can qualify for favorable treatment under section 1231. It also illustrates the application of the multiple-step process for bifurcating such gain under methods prescribed by the IRS. Because the different methods can produce different results that affect the tax consequences of the disposition, property owners and their tax advisors must test the results for each piece of qualifying property and choose the most appropriate method, depending upon those results.

Keywords: Section 179, section 179(f), qualified leasehold improvement property, qualified restaurant property, qualified retail improvement property, section 1245 recapture, section 1231 gain

Suggested Citation

Borden, Bradley T. and Lieberman, Cali, Section 179(f) Deductions and Recapture of Costs of Qualified Real Property (February 5, 2014). Journal of Taxation, Vol 120, No 4, 2014; Brooklyn Law School, Legal Studies Paper No. 295. Available at SSRN: https://ssrn.com/abstract=2391441

Bradley T. Borden (Contact Author)

Brooklyn Law School ( email )

250 Joralemon Street
Brooklyn, NY 11201
United States

Cali Lieberman

Independent

No Address Available

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