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From: rb@houxn.UUCP
Newsgroups: net.invest
Subject: Re: Rental Property Depreciation
Message-ID: <549@houxn.UUCP>
Date: Fri, 7-Sep-84 17:15:51 EDT
Article-I.D.: houxn.549
Posted: Fri Sep  7 17:15:51 1984
Date-Received: Thu, 13-Sep-84 06:15:44 EDT
References: <126@ihdba.UUCP>
Organization: AT&T Information Systems, Holmdel NJ
Lines: 35

When converting from owner-occupied to rental, you may indeed
deduct all expenses....Condo fees, maint, repairs, taxes, etc.

For depreciation, you may deduct either "straight line" or accelerated.
When property, the maximum acceleration allowable is 25%...
Example: condo bought for $100,000....useful life 20 years
  Note:(assume 0 salvage value, since condo has no associated land!)
first year depreciation =100,000/20 * 1.25=6250
2nd year =(1000000-6250)/20*1.25=5860
etc.....note that at some point this will result in LESS than S/L depreciation.
You are then allowed to "switch" and use the S/L method!  (But you can't
go back!!)

An interesting situation arises if you dispose the property within 24 months
of moving....you lower your cost by the depreciation deductions taken...
which increases your taxable profit.....but if done within 24 months, it
is postponed until the sale of the NEXT house!

This is frequently used as a ploy by retiring folks, to maximize their
retirement deductions on the final sale of a large house after age 55.
You can then exempt a cumulative profit (I think around $150K now...it
changes).

If you don't dump it within 2 yrs, you have to pay capital gains on the profit
(that is selling price-cost-depreciation) when the property is sold.
Since the capital gains rate is lower than normal income rate, this is
still a good deal!




	Rob Botwin
    .....{utah-cs|seismo|decvax}!harpo!eagle!hogpc!houxn!rb
	ATT/IS Labs (201) 577-5016 (Cornet 8-270-5016)
	FJ 1B-130