Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP
Posting-Version: version B 2.10.2 9/18/84; site burl.UUCP
Path: utzoo!watmath!clyde!burl!wts
From: wts@burl.UUCP (wts)
Newsgroups: net.invest,net.taxes
Subject: Re: Reagan tax plan vs. Real Estate
Message-ID: <780@burl.UUCP>
Date: Tue, 23-Jul-85 09:34:04 EDT
Article-I.D.: burl.780
Posted: Tue Jul 23 09:34:04 1985
Date-Received: Thu, 25-Jul-85 03:58:46 EDT
References: <815@qumix.UUCP>
Reply-To: wts@burl.UUCP (wts)
Distribution: net
Organization: AT&T Technologies, Burlington NC
Lines: 38
Xref: watmath net.invest:714 net.taxes:868
Summary: 

In article <815@qumix.UUCP> len@qumix.UUCP (Leonard Labar) writes:
>I just read in the paper that the depreciation schedule for real estate
>investments was stretched out to 19 years vs. the previous ACRS method.
>Does anyone have real data on this?  The article also said it was
>retroactive back to June 30th.  Also was supposed to be certain to get
>approved this week.  What a zinger!  Since I just bought a rental
>townhouse you can imagine my concern.  I had planned to rent it and
>resell in 5 years.  How much would I lose from the previous ACRS
>depreciation schedule?  

	
	I have just recently sold some rental property (previous
	principle residence 1978-82 that I subsequently rented
	1982-6/1985). When I complained to my accountant that
	because I was not eligible for ACRS depreciation on the
	property because of its purchase date (1978), and asked
	what schedule and time frame to set it up on, he advised
	plain old straight line depreciation.  Since
	real residential property does not really depreciate, but
	appreciates in value,  that the difference between the capital
	gain realized with ACRS, DDB, or any other accelerated 
	depreciation, and what would be realized upon sale with 
	straight line would not be subject to capital gains taxation.
	The difference would be taxable as ORDINARY INCOME. 

	I set my depreciation schedule up as 20 years, Straight Line.
	Now upon sale all appreciation to the depreciated basis of
	the property is long term capital gain, and declarable at
	a much lower level. The moral of the story being that
	accelerated capital recovery may be advantageous in the
	short term, for property that in reality appreciates it
	will bite you in the wallet upon sale.


					William T. Sykes
					Federal Systems Division
					AT&T Technologies, Inc.
					Burlington, NC