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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Road Walker who wrote (172747)	7/28/2003 9:21:37 PM
From: i-node	Read Replies (1) \| Respond to of 1575626

Thanks for the accounting rules BS In the meantime folks are depreciating an asset that actually goes up in value over 80% of the time. a) It really doesn't matter. Depreciation claimed reduces the basis of the asset, so that when it is sold a gain is recognized to the extent of the depreciation claimed. While it may (or may not) be capital gain, the underlying asset IS a capital or §1250 asset, so it SHOULD be capital gain (although, under certain circumstances, such "recaptured" depreciation can be subjected to ordinary income rates). b) I disagree, however, that common sense doesn't apply. A fundamental premise of taxation is that we don't tax where there is no "wherewithall to pay", and we don't tax gains that are unrealized. A gain on real property that hasn't been sold is, by definition, unrealized, and given that real estate is often the subject of a high degree of leverage, taxing such unrealized gains would violate the "wherewithall to pay" concept (one that, admittedly, is sometimes violated, but only in extreme circumstances). So, assuming that appreciation is going to ultimately be realized is a presumption that is at odds with the fundamentals of taxation. c) Further, you are generally depreciation the STRUCTURE, whereas the land value is NOT subject to depreciation. Structures DO depreciate. One can argue about the rate, but structures do depreciate. d) Depreciation tax rules have, since the early 1960s, been more about trying to control the behaviors of taxpayers than about trying to "match" income with the expenses that relate to that revenue (which is the purpose of depreciation for accounting purposes). While it isn't perfect, it is totally logical and represents common sense applied to its extreme.