How can I claim section 1245 recapture income as eligible gain?
To my knowledge, it's right there in the final regulations. The step-up in basis after a ten-year holding period will effectively wipe out all built-in gain on any QOZP, including Section 1245 recapture. No need to do anything special with respect to Section 1245 recapture to get these benefits.
If the gain is recaptured as ordinary, then you can't. If the recaptured income is characterized as capital, then you are good.
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