C Corp Sellout Defered tax question

I am looking at selling the assets of a c-corp and this corp has
a defered tax payable, which is due to the difference between book and tax methods of depreciation. My question is what happens when the assets are sold? Would the amount of the defered tax be due or would capital gains tax apply on the difference between the "tax value" and asset sales price?

Rick
Kansas City MO

The deferred tax payable is an accounting recognition of the difference between book and tax depreciation. It is an estimate of what tax on a gain from the sale would be, assuming the assets were sold at book value. But it is only an accounting estimate. It is not used in reporting gain to the IRS.

If the assets are sold for more than their adjusted basis (cost less tax depreciation), and if they were used in the business for more than one year, the gain would be taxed as Section 1231 gain, which means that the gain is taxed as ordinary income to the extent of depreciation allowed or allowable on the property. The rest of the gain, if any, is taxed as long-term capital gain.