koch@chopin.DEC (Kevin Koch LTN1-2/B17 DTN229-6274) (07/24/85)
> ... When I complained to my accountant that because I was not >eligible for ACRS depreciation, ... and asked what schedule and time >frame to set it up on, he advised plain old straight line >depreciation. ... 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. If you and I bought, held, and sold identical pieces of property for identical times and prices, but I used ACRS and you used straight line, who would be ahead? I WOULD!!!! because I would have gotten an interest free loan from the IRS for the entire time I owned the property. The amount of the loan would be the amount of accelerated depreciation recaptured at the sale.