Depreciation - Posted by Patrick Harper

Posted by Bud Branstetter on March 12, 2001 at 13:34:03:

I think you’re right. I was just trying to point out that he doesn’t need to 1031 or worry if he stays within the guideline and sells in time.

Depreciation - Posted by Patrick Harper

Posted by Patrick Harper on March 11, 2001 at 19:54:50:

Should I depreciate my single family unit yearly if I am only going to rent it out for 2 or 3 years before I sell it. And if I do, how do I figure out the tax money I should set aside from the gains on the depreciation credit that I will recieve. Because I know I will sell the home for a profit when I do sell. I hope someone understands this question. I basically just want to be able to set aside monies to cover taxes and want to know how to figure that up?

Re: Depreciation - Posted by Gary

Posted by Gary on March 12, 2001 at 13:09:40:

You have to take the depreciation; when you go to sell, the basis of the property will be the original cost plus improvements minus depreciation, whether you took it or not. Capital gain is selling price less basis. Don’t try to put money aside to pay the capital gains tax. Just deduct it from your profit when you sell. I think earlier posts assumed you have, are, or will live in this single family home; I didn’t read that information in your post. You can avoid capital gains if you lived in the house as your primary residence two years out of the last five years. These rules are complicated so I would get the advice of a competent tax accountant before I make any assumptions about what your capital gains obligations may be in the future.

Re: Depreciation - Posted by Bud Branstetter

Posted by Bud Branstetter on March 11, 2001 at 23:34:43:

Depreciation is a paper loss. If you do not take it you will have to recature it as if you had taken it. Consider selling in two years and the gain will not be taxable. You will have lived there three of the last five years and be exempt. You will have to recature depreciation but then you will have the cash to repay what you deducted the prior two years.

Then there is always the strategy of the 1031 exchange into another income property for a couple years before turning it back to a homestead at the lower basis.

Re: Depreciation - Posted by Shaun

Posted by Shaun on March 11, 2001 at 20:35:14:

If you IRS 1031 tax exchange it when you sell you will not owe any taxes then.

Re: Depreciation - Posted by Shaun

Posted by Shaun on March 13, 2001 at 06:53:51:

If you are not going to live in it you don’t have to take the depreciation when you sell if you sell with a IRS 1031 Tax Exchange. You defer it. You may or may not ever owe it. Thats the beauty of a 1031.

Re: Depreciation - Posted by Sheik

Posted by Sheik on March 12, 2001 at 11:51:47:

I could be wrong - but I think it’s 2(not 3) of the
last 5 years.