 Then we've got the section 179 property, so if you take a section 179 deduction that's an accelerated kind of depreciation situation where you get to take more of the benefits and the first year of purchase typically explained in chapter 800 depreciation we'll talk more about that later possibly for an asset and before the end of the assets recovery period the percent of the business use drops to 50% or less you must recapture part of the section 179 deduction. In other words you got this big deduction for for the property that was business property and now you're not using it mainly for business and you got this big accelerated deduction for and that's where the problem comes into play right. So for example if you if you bought a piece of equipment and and usually you'd have to put it on the books and depreciate it over five years and whatnot and it's business property but they gave you this massive upfront depreciation of the 179 so you got to deduct the whole 50,000 or whatever in year one and then in year two you've determined now that it's not business property but only like half business property. Well if it was personal property you wouldn't have got the deduction for it which now has been accelerated and you got all the deduction in year one you see the problem here that's and that could lead into this problem that you got a deduction that you shouldn't have got a deduction for because you should have got the deduction when you consume the property in the future but they wanted to give you an accelerated depreciation method to deduct it all in the first year for your business deduction even though you haven't consumed it yet and then you're saying it's not business property anymore but half personal property and that's okay so you do this by including an income on schedule c part of the deduction you took use part four of form 4797 to figure the amount to include on schedule c c chapter 2 of publication 946 to find out when you recapture the deduction sale or exchange of depreciable property if you sell or exchange depreciable property at a gain you may have to treat all or part of the gain due to depreciation as ordinary income so we talked about this a little bit in prior presentations when we looked at distributions possible gains normally ordinary income for a business is when you sell like inventory or goods and services if you have depreciable property that you're not selling as inventory you're using it to generate revenue in the business by just using a forklift or whatever and then you have to sell the forklift then then when you sell the forklift you would think well maybe that should be capital gain kind of income but the amount that you got a depreciation for in prior years was ordinary income depreciation so you would think that you might have to record the gain as ordinary income it would make sense up at least until the point that you got the depreciation benefit at ordinary income to match those two things out and that kind of weirdness happens because now we have capital gains rates which might be different than ordinary income rates and the question is which of those do we get to take so you figure the income due to depreciation recapture in part three of form four seven nine seven for more information c chapter four of publication five four four