What’s this recapture thing all about, anyway?
What’s this recapture thing all about, anyway? We tell people that if they sell an asset (either a capital asset or a Sec. 1231 business asset) at a gain, if held more than one year, we will give them a favorable (i.e., low) tax rate on the gain. Then we come back and tell them “Wait, that is only on the part that is not recaptured as ordinary income!” What is going on? Why have the recapture rules at all? Exactly what is being recaptured? What is the “wrong” that the government is attempting to “right”, or in other words, what is the “unfair” thing the tax laws are attempting to prevent from taking place by having recapture rules?