Publication 946
How To Depreciate Property

Section 179 Deduction; Special Depreciation Allowance; MACRS Listed Property

For use in preparing 2002 Returns

When Do You Recapture
MACRS Depreciation?

• Clean-fuel vehicle
• Clean-fuel vehicle refueling property
• Disposition
• Nonresidential real property
• Recapture
• Residential rental property

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. There is no recapture for residential rental and nonresidential real property unless that property is qualified property (or Liberty Zone property) for which you claimed a special depreciation allowance (or Liberty Zone depreciation allowance), which is discussed in chapter 3. For more information on depreciation recapture, see Publication 544.

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