What a partial disposition is
A partial disposition occurs when you retire a structural component of a building — for example, replacing a roof, HVAC system, or windows — while keeping the rest of the property. Under IRS Reg. 1.168(i)-8, you may elect to write off the remaining undepreciated basis of the disposed component in the year of disposition.
Why the election matters
Without the election, the old component's basis keeps depreciating until the end of the property's recovery period — you never get a deduction for its remaining cost. Taking the election accelerates that deduction into the year you replace it, which can offset the cost of the new component.
The recapture angle
If you elect to dispose of a component, any gain on it (if it had some value when removed) would be recaptured. More commonly, a partial disposition creates a loss deduction. In either case, you also start depreciating the new replacement component as a new asset placed in service.
Frequently asked questions
What is a partial disposition on a rental?
Retiring a structural component (roof, HVAC, etc.) and electing to write off its remaining undepreciated basis under IRS Reg. 1.168(i)-8.
Does a partial disposition trigger recapture?
Only if there's a gain on the disposed component. Most partial dispositions result in a loss deduction, not recapture.
Do I have to elect a partial disposition?
It's elective. Without it, the old component's basis continues depreciating alongside the building.
Sources
- IRS Topic No. 409 — Capital Gains and Losses
- IRS Publication 544 — Sales and Other Dispositions of Assets
- IRS Publication 946 — How to Depreciate Property
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.