D incorporated has accounting practice this year receiving only stock on the exchange. As part of the incorporation transaction, he transferred a computer worth $5,000. Depreciation claimed by him prior to the transfer was $1000. Two months after the transfer the corporation sold the computer, realizing a $2,500 gain. Briefly explain how the depreciation recapture provisions operate in this situation.

SWFT Comprehensive Volume 2019
42nd Edition
ISBN:9780357233306
Author:Maloney
Publisher:Maloney
Chapter20: Corporations: Distributions In Complete Liquidation And An Overview Of Reorganizations
Section: Chapter Questions
Problem 27P
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D incorporated has accounting practice this year receiving only stock on the exchange. As part of the incorporation transaction, he transferred a computer worth $5,000. Depreciation claimed by him prior to the transfer was $1000. Two months after the transfer the corporation sold the computer, realizing a $2,500 gain. Briefly explain how the depreciation recapture provisions operate in this situation.  

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