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Questions and Answers
When real property is sold at a gain, and accelerated depreciation has been claimed, what tax-related event might the owner face?
When real property is sold at a gain, and accelerated depreciation has been claimed, what tax-related event might the owner face?
- Exemption from capital gains tax on the sale.
- A requirement to pay tax at ordinary rates on the excess accelerated depreciation. (correct)
- Automatic reduction in property taxes for the subsequent year.
- A tax deduction equal to the amount of depreciation claimed.
What term defines the monetary gain resulting from the increase in the market value of an investment, not including additional capital investments made?
What term defines the monetary gain resulting from the increase in the market value of an investment, not including additional capital investments made?
- Adjusted Basis
- Recaptured Depreciation
- Appreciation (correct)
- Capital Loss
A property owner sells a building for more than its adjusted basis, having claimed accelerated depreciation. What tax implication directly arises from this scenario?
A property owner sells a building for more than its adjusted basis, having claimed accelerated depreciation. What tax implication directly arises from this scenario?
- The owner is exempt from paying property taxes for the next five years.
- The owner can defer the capital gains tax indefinitely.
- The owner will receive a tax credit for investing in real estate.
- The owner may have to pay tax on the recaptured depreciation at ordinary income rates. (correct)
An investor purchases stock for $5,000. Over the next year, the market value increases to $8,000 due to market demand. What is this increase in value specifically known as?
An investor purchases stock for $5,000. Over the next year, the market value increases to $8,000 due to market demand. What is this increase in value specifically known as?
Which of the following is the MOST accurate description of 'recaptured depreciation'?
Which of the following is the MOST accurate description of 'recaptured depreciation'?
A commercial building has undergone significant appreciation. Which scenario would accurately reflect the concept of appreciation related to this building?
A commercial building has undergone significant appreciation. Which scenario would accurately reflect the concept of appreciation related to this building?
What is one potential consequence for a real property owner who has claimed accelerated depreciation and then sells the property at a profit?
What is one potential consequence for a real property owner who has claimed accelerated depreciation and then sells the property at a profit?
An art collector purchased a painting for $10,000. After several years, the art market booms, and the painting is now valued at $30,000. By how much has the painting appreciated?
An art collector purchased a painting for $10,000. After several years, the art market booms, and the painting is now valued at $30,000. By how much has the painting appreciated?
A business owner utilized accelerated depreciation on equipment. Upon selling this equipment for more than its adjusted basis, what potential tax implication should the owner be prepared for regarding the depreciation?
A business owner utilized accelerated depreciation on equipment. Upon selling this equipment for more than its adjusted basis, what potential tax implication should the owner be prepared for regarding the depreciation?
A technology company's stock value increases significantly due to a successful product launch, despite no new capital investments made by the company. What financial term BEST describes this increase in value?
A technology company's stock value increases significantly due to a successful product launch, despite no new capital investments made by the company. What financial term BEST describes this increase in value?
Flashcards
Recaptured Depreciation
Recaptured Depreciation
Tax paid on excess accelerated depreciation when real property is sold at a gain.
Appreciation
Appreciation
A monetary gain from an investment's market value increase, not counting additional investments.
Study Notes
- When real property is sold at a gain and accelerated depreciation has been claimed, the owner may be required to pay a tax at ordinary (non-accelerated) rates to the extent of the excess accelerate depreciation.
- This is known as recaptured depreciation.
- A monetary gain resulting from the increase in the market value of an investment, excluding additions of capital, is known as appreciation.
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Description
When real property is sold at a gain and accelerated depreciation has been claimed, the owner may be required to pay a tax at ordinary rates. This tax applies to the extent of the excess accelerate depreciation, and is known as recaptured depreciation. Appreciation refers to a monetary gain resulting from an increase in the market value of an investment.
