Tax Questions - Building Spreadsheet

[Aaron Moayed]

I'm building a spreadsheet, and I'm stuck on a part I'm not quite sure on:

• Basically, I'm asking if dividend recapture amount is realized only if there's a gain on sale, and if it's dollar for dollar (e.g., $1,000 in gain = $1,000 in recapture even if total recapture amount is, say, $4,000)... AND if anything beyond that is then used for regular capital gains tax (i.e., one has to get through the dividend recapture owed before capital gains taxes kick in).

For example, at the end of the spreadsheet, I've show all depreciation taken (since we take all depreciation whether or not the property is cash flow positive (SEE BLACK ARROW IN IMAGE).

Then I've added the passive losses from negative After-Tax Cash Flows for each of 5 years (SEE RED ARROW IN IMAGE).

Then I've got the tax left. There is a tiny bit of gain shown in the red arrow section, but I'm wondering if the full amount of dividend recapture is completed if there's any gain on the property, or if the gain on sale amount is dividend capture amount dollar for dollar. Also, does the negative remaining loss just go away (SEE GREEN ARROW IN IMAGE)?

[Eamonn McElroy]

You need to adjust your formulas to use "IF" statements or "MIN" / "MAX".

Generally 1250 gain is the lesser of depreciation taken or allowed and net taxable gain.  Any remaining gain is 1231 gain.  If there is a loss, you don't worry about 1250 gain.  It's all a 1231 loss (which is ordinary in nature).

E.g. You have a 100,000 building (ignore land for simplicity), with 25,000 depreciation taken on the building.  If it sells for:

90,000 -- You have a 1250 gain of 15,000.

110,000 -- You have a 1250 gain of 25,000 and a 1231 gain of 10,000.

50,000 -- You have a 1231 loss of 25,000.