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From: mcb@styx.UUCP (Michael C. Berch)
Newsgroups: net.taxes
Subject: Re: Real Estate Taxes and Tax Reform
Message-ID: <6057@styx.UUCP>
Date: Mon, 10-Jun-85 13:48:35 EDT
Article-I.D.: styx.6057
Posted: Mon Jun 10 13:48:35 1985
Date-Received: Wed, 12-Jun-85 07:46:55 EDT
References: <257@mhuxv.UUCP>, <2404@mit-hermes.ARPA> <675@charm.UUCP> <1632@amdahl.UUCP>
Organization: Lawrence Livermore Laboratory, Livermore, CA
Lines: 41

> > Real estate taxes on a rental property will be allowed, as
> > will depreciation.  When considered with your other investment
> > income, you can't loose more than $5k due to depreciation.
>
> Great.  So once again the wage slave gets stiffed.  So who
> is going to have all this investment income that can be
> offset by depreciation?  Why, the well to do investor.  And
> who will have wage income that can't be offset?  Why the
> grubby little wage slave trying to use the tools of the
> rich to hang onto some of his money.  Why, we can't have
> that, now can we.

Property taxes and depreciation on a rental property are
deductible because they are EXPENSES incurred in an attempt to
make money. Owning rental property is a business like any other
business. You receive income and you pay expenses -- the difference 
is the profit upon which you are taxed.

People don't realize the fundamental difference between
deductions for business expenses and personal (Schedule A)
deductions. Tax credits and Schedule A deductions are permitted 
because the government wishes to encourage certain behavior and
give breaks to certain classes of people (e.g., victims of
casualty or high medical expenses). Business (Schedule C) and
rental/royalty property deductions are used simply to be able to
calculate the profit of the business which is to be taxed.

The limitation on depreciation expense is due to the way that
depreciation deductions can be used to "leverage" tax losses
on real estate investments, which is considered by some to be
inequitable.

It's true that a "wage slave" who owns no income-producing assets
does not benefit from the business deductibility of such things
as property taxes; on the other hand, he doesn't have to pay
them, either, nor take the risk that his investment will not take
in enough income to be profitable.

Michael C. Berch
mcb@lll-tis-b.ARPA
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