Depreciation Recapture

Purchase price = $10,000
Horizon for depreciation = 8 years
Total depreciation deduction = $6,000
Selling price in Year 8 = $6,000

[1] Selling price = $6,000 < Purchase price = $10,000
Recaptured gain = $6,000 - ($10,000 - $6,000) = $2,000
→reported as either ordinary income or capital gain, depending on the type of property that is sold.

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Purchase price = $10,000
Horizon for depreciation = 8 years
Total depreciation deduction = $6,000
Selling price in Year 8 = $15,000

[2] If Selling price > Original cost (purchase price), then
Recaptured depreciation = Accumulated depreciation = $6,000

If the equation in [1] is applied, then
Recaptured gain = $15,000 - ($10,000 - $6,000) = $5,000 + $6,000= $11,000 (incorrect)