Keith & Michael purchased residential real estate in 2010 to be used in the rental activity. They paid $42,000 for the property, had $12,500 of capital improvements and have claimed depreciation deductions of $9,909 of depreciation.
They sell the property in 2015 for $64,500.
What is their adjusted tax basis?
What is their gain?
Is there recapture? If so, how much? At what rate must it be recaptured?
What code section dictates this treatment?