Is reclaimed depreciation taxed in ADDITION to capital gains?!?
When house is sold, does IRS tax BOTH reclaimed depreciation and capital gains? We have a small house in FL that we built in 1978 and rented out ever since. It is fully depreciated, and is in very rough shape. We've been presented with an $85,000 cash as-is offer and are inclined to take it; we live in CA and are weary of managing it long distance. We are debating the relative merits of a 1031 exchange with the proceeds, vs just biting the bullet and paying the 15% capital gains. (We do not have burning desire to buy another property but it's not out of the question if it makes profound sense financially). But then I read that 'the IRS will reclaim depreciation and it can be as high as 25%' - YIKES! Is that on top of capital gains?! Any suggestions would be appreciated.