Depreciation recapture (when selling parks)?

I’m a new member on this forum (but have been an investor in MH park funds for ~6 years).

I wanted to understand better what normally happens (accounting-wise) on the sale of a MH park. Partly because I’m thinking of doing some 401k Roth conversion this year, and partly to improve my tax knowledge (a never-ending process).

We have one MH fund that finished in 2021 and others that have sold several parks, so this is the first year we are seeing significant MH park exits.
I have seen final K-1’s for apartment funds, and understand section 1231, 1245, 1250 “reasonably well” but I think the bonus depreciation on a MH park will be much different.

So, my question is: How does depreciation recapture typically work for a mobile home park sale?

For an example (numbers rounded and scaled to 100k investment):

Investment of 100k in a MH fund in 2019.
2019 K-1:
box1: ord inc of -1,200.
box2: RE income of -9,600
Remaining basis of 89,200
Note: I think “bonus depreciation” accounts for 2,200 of the “box 2 loss”, from one of the state K-1 forms.

2020 K-1:
box1: ord inc of -400.
box2: RE income of -82,100
dist of 5,200
Remaining basis of 0 (from a statement A there was 1,500 of “other expenses on books, not on k-1” that reduced this to 0).
Note: I think “bonus depreciation” accounts for 81,500 of the “box 2 loss”, from one of the state K-1 forms.

2021: fund sold all assets, distributed 156,100 total.

My understanding is that much of the MH park value will be “infrastructure” (pipes, electrical wiring, pads, etc.), and will be 15 year property, and eligible for “bonus depreciation”. Which accounts for the large amount of box 2 loss.

But, upon sale I believe that depreciation gets recaptured under section 1245 (so as ordinary income), upto the amount of the original “depreciation” or the value those assets were sold for. Since the fund only operated for ~2 years I’m guessing that the sale value of those assets will be similar to the purchase value.


  • Deprec recapture (sec 1245) of 2,200 + 81,500 = 83,700 → goes to box 1?
  • Guess other box 1 income of ~ 1000
    total box 1: ~ 84,700
  • Guess will have box 2 of ~ -5000 (some regular depreciation, interest payments, etc.)
  • 1250 depreciation recapture: Guess it will be small, ~0 ?

So, when calculating “1231 gains” (which can release suspended passive losses):
dist - (basis + box 1 + box 2)
156,100 - (0 + 84,700 - 5000) ~= 76,400 ?

Note: I asked the fund about any tax preview, but they are still working thru year end accounting and weren’t willing to give estimates :frowning:
I did find some helpful references on depreciation recapture, which others might also find useful, here and here.

Do these calculations seem like they are in the right ballpark?
Or any important steps that I am missing?