Re: Just the tax fax pleezz… - Posted by Dave T
Posted by Dave T on December 25, 1999 at 23:44:45:
DISCLAIMER: I am not a tax professional. The information provided in this post should be confirmed by a competent tax professional before you act on any information contained herein.
Q. Rental property is 40-year class life depreciation property.
A. Residential rental property (including duplexes, apartment houses, condominiums and cooperative units specifically used personal residences – does not include hotels and motels) falls into the 27.5-year (straight line) residential rental real property class. Commercial real property falls into the 39-year (straight line) commercial real property class. The 40-year depreciation rate applies to alternative minimum tax (AMT) calculations.
Q. If you claim the depreciation annually and sell the property after a holding period of say, 7 years, you have to pay back the 7 years depreciation on your taxes–what the IRS calls ‘recapture’.
A. Depreciation recapture rule on residential real estate is: The amount of depreciation in EXCESS of straight-line is recaptured as ordinary income in the year of sale.
Q. BUT, if you 1038-exchange the property, they don’t recapture the depreciation. In which case your basis in the new property is–what?
A. If you use a 1031 tax deferred exchange for qualified investment property, the simple rule for determining the basis of the acquired property is
Net Cost of acquired property - Gain NOT taxed on property given up = New basis