Depreciation Recapture

[taxu2]

Client purchased and began depreciation a beauty shop on 08-01-05 for 37,050. They sold the shop 10-06-22 for 49,900. Client purchased another business and moved her beauty shop into that building and pays her "other business" rent. Would her depreciation recapture be taxed as ordinary income or would there be a possible way for a like kind exchange. Any help is greatly appreciated. I'm not too familiar with the sale of business assets. TIA! 

[sjrcpa]

No like kind exchange. It only applies to real property and the sale had to be set up that way.

Did she move equipment from the old business location to the new one? Or did she sell the equipment?

A sale of equipment at a gain gives ordinary income to the extent of the prior depreciation. The rest of the gain is 1231 gain.

What do you mean by "pays her "other business" rent"?

[taxu2]

Ok, on the like kind exchange, thank you. She did move her equipment. Just sold the building. The business she bought was a non profit arts venue. She moved her small beauty shop inside it. She pays that business monthly rent. 

[sjrcpa · Accepted solution]

Then gain on the sale of the building is Unrecaptured 1250 Gain, taxable at a maximum rate of 25% up to the amount of depreciation.

[taxu2]

Thank you! 

[sjrcpa]

You're welcome.