If a C corporation uses straight-line depreciation on real estate (§ 1250 property), no portion of a recognized gain on the sale of the property will be recaptured as ordinary income.

Question

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For § 1250 property (real estate), straight-line depreciation does not result in ordinary income recapture upon sale. However, any depreciation claimed in excess of straight-line (if allowed in certain cases) would be recaptured as ordinary income. Since the question specifies straight-line depreciation, the implication that no portion would be recaptured as ordinary income is incorrect because it ignores the potential for excess depreciation recapture. Additionally, § 1250 recapture rules generally convert what would be capital gain into ordinary income to the extent of depreciation allowed or allowable, but this primarily applies to depreciation methods that accelerate depreciation beyond straight-line. The question's phrasing might lead to confusion by suggesting that straight-line depreciation on § 1250 property avoids recapture entirely, which misrepresents the nuanced application of recapture rules.

If a C Corporation Uses Straight-Line Depreciation on Real Estate