(1) Aggregate of deductions allowed under sections 175 and 182 | $24,000 |
(2) Minus: Gain recognized as ordinary income under section 1251(c)(1) | $3,000 |
(3) Difference | $21,000 |
(4) Multiply: Applicable percentage for land disposed of within sixth year after it was acquired | 80% |
(5) Amount in paragraph (a)(1)(i)(a) of § 1.1252-1 | $16,800 |
(6) Gain realized (see subdivision (i) of this example) | $10,000 |
(7) Minus: Amount in line (2) | $3,000 |
(8) Amount in paragraph (a)(1)(i)(b) of § 1.1252-1 , applied in accordance with subparagraph (2) of this paragraph | $7,000 |
(9) Lower of line (5) or line (8) | $7,000 |
Thus, the entire gain realized on the transfer, $10,000, is recognized as ordinary income since that amount is equal to the sum of the gain recognized as ordinary income under section 1251(c)(1), $3,000, and under section 1252(a)(1), $7,000. For treatment of the farm land in the hands of B, see example (2) of paragraph (f)(3) of this section.
(1) Amount of gain under section 1252(a)(1) (determined without regard to subparagraph (1) of this paragraph): | |
(a) Aggregate of deductions allowed under sections 175 and 182 | $18,000 |
(b) Minus: Gain recognized as ordinary income under section 1251(c)(1) | $5,000 |
(c) Difference | $13,000 |
(d) Multiply: Applicable percentage for property disposed of within the fifth year after it was acquired | 100% |
(e) Amount in paragraph (a)(1)(i)(a) of § 1.1252-1 | $13,000 |
(f) Gain realized (amount realized $40,000, less adjusted basis, $15,000) | $25,000 |
(g) Minus: Amount in line (b) | $5,000 |
(h) Amount in paragraph (a)(1)(i)(b) of § 1.1252-1 | $20,000 |
(i) Lower of line (e) or (h) | $13,000 |
(2) Limitation in subparagraph (1) of this paragraph: | |
(a) Gain recognized (determined without regard to section 1252) | $8,000 |
(b) Minus: Gain recognized as ordinary income under section 1251(c)(1) | $5,000 |
(c) Difference | $3,000 |
(3) Lower of line (1)(i) or line (2)(c) | $3,000 |
Thus, the entire gain recognized under section 351(b) (determined without regard to sections 1251 and 1252), $8,000, is recognized as ordinary income since that amount is equal to the sum of the gain recognized as ordinary income under section 1251(c)(1), $5,000, and under section 1252(a)(1), $3,000.
(1) Aggregate of deductions allowed under sections 175 and 182 | $18,000 |
(2) Minus: Gain recognized as ordinary income under section 1251(c)(1) | 0 |
(3) Difference | $18,000 |
(4) Multiply: Applicable percentage for property disposed of within the fifth year after it was acquired | 100% |
(5) Amount in paragraph (a)(1)(i)(a) of § 1.1252-1 | $18,000 |
(6) Gain realized (amount realized, $67,500, less adjusted basis, $48,000) | $19,500 |
(7) Minus: Amount in line (2) | 0 |
(8) Amount in paragraph (a)(1)(i)(b) of § 1.1252-1 | $19,500 |
(9) Lower of line (5) or line (8) | $18,000 |
(1) Amount of gain under section 1252(a)(1) (determined without regard to subparagraph (1) of this paragraph): | |
(a) Aggregate of deductions allowed under sections 175 and 182 | $18,000 |
(b) Minus: Gain recognized as ordinary income under section 1251(c)(1) | $5,000 |
(c) Difference | $13,000 |
(d) Multiply: Applicable percentage for property disposed of within the fifth year after it was acquired | 100% |
(e) Amount in paragraph (a)(1)(i)(a) of § 1.1252-1 | $13,000 |
(f) Gain realized (amount realized, $67,500 (less adjusted basis, $48,000)) | $19,500 |
(g) Minus: Amount in line (b) | $5,000 |
(h) Amount in paragraph (a)(1)(i)(b) of § 1.1252-1 | $14,500 |
(i) Lower of line (e) or (h) | $13,000 |
(2) Limitation in subparagraph (1) of this paragraph: | |
(a) Gain recognized (determined without regard to section 1252) | $5,000 |
(b) Minus: Gain recognized as ordinary income under section 1251(c)(1) | $5,000 |
(c) Difference | 0 |
(d) Plus; The fair market value of property other than farm land acquired which is qualifying property under section 1033 | $62,500 |
(e) Sum of lines (c) and (d) | $62,500 |
(3) Lower of line (1)(i) or line (2)(e) | $13,000 |
26 C.F.R. §1.1252-2