A $1.2 million cash sale combines real estate and operating-business assets, with an estimated $700,000 allocated to the building and $500,000 to equipment, goodwill, a liquor license, and a trade name. The building’s estimated $420,000 gain can qualify for 1031 exchange treatment, while the operating-business assets’ estimated $320,000 gain is fully exposed. Depreciation recapture on restaurant equipment is generally treated as ordinary income rather than long-term capital gains. Federal long-term capital gains rates can reach 20% plus an additional 3.8% net investment income tax, creating an estimated $120,000 to $150,000 combined federal and state tax impact without planning.
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