C Land Mini Seminar
INVESTMENT SERIES
Depreciation
Presented Stephen Lee/Jane Choi with CRI
Depreciation & Deduction
Definition of Depreciation :
Loss of value brought about by physical deterioration or
Functional or Economic/External obsolescence.
Types of depreciation
1) Physical Deterioration
2) Functional Obsolescence
3) Economic/External Obsolescence
Tax Deduction on Depreciation
- Depreciation periods
– Residential Investment Property – 27.5 years
– Commercial Investment Property – 39 years
* Note: Land is not depreciable.
Straight-line method
Notes:
- Investment property only
- Land is not depreciable.
- Straight-line method
- Cost segregation studies
– Reclassify items like appliances, carpeting, and land improvement for shorter depreciation like 5, 7, or 15 years.
– Certain/special facilities for commercial properties
Notes:
- Bonus depreciation
– Some land improvement, for example, sprinkler system, fence, landscaping, can be considered as bonus depreciation that 100% cost can be deducted at the first year of service.
– For the sale of business opportunity, a bonus depreciation allowed 20% on new or used personal property used in the business in the first year
6. Depreciation recapture
– When you sell a depreciated property, IRS may recapture depreciated value.
Value appreciation and depreciation
Principle of conformity
– Principle of regression
– Principle of progression
