4 ms·
This is certainly not my area so I could be missing something basic. But after you sell a property, why shouldn't that force a reevaluation on past depreciation
by abeppu 4y ago
This is certainly not my area so I could be missing something basic. But after you sell a property, why shouldn't that force a reevaluation on past depreciation writeoffs? In idkyall's post, they mention the scenario of depreciating your property down to an effective value of $0 and then selling to buy another property to start again. You've argued that this only covers a fraction of your income. But at a basic level, if you get enough from the sale to buy a new property, then the old one must have been worth much more than $0 so one was wrong for decades about claimed depreciation ... right? In which case, it seems like it should be natural and fair to have to pay up on taxes from those previous years.
If I can invest in real estate, rent it out for decades, and then sell it at a significant profit (which seems to be the case in many in-demand cities), then why should _any_ amount of that rental income get a to be balanced against imaginary depreciation?
- foota 4y agoWhat you describe does happen, unless they use that transfer process described, but by doing so they reduce the effective cost basis of the new property by the difference between the cost basis of the old one and the sale price.
- rory 4y agoYeah the 1031 exchange simply defers the tax to a later time. But if you defer it until you die, your heir (in many cases) gets off tax-free.
- foota 4y agoYeah, I guess the unintended? consequence here is that the lack of a time window allows indefinitely propagating it, maybe the exchange should come with a time window phase out.