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Originally Posted by anyonebutedmonton
I’m somewhat ignorant with respect to US taxation. Do you mind explaining how the financing structure would impact depreciation? My understanding is that there could be interest on any debt financing, which would be deductible, but I’m not seeing the connection to the depreciation.
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Rich people won't necessarily go spend $10 million of their own money on the real estate purchase. Instead they'll finance it and use the finance charges as an 'expense' to further reduce their income tax exposure.
If interest rates are around 2-3%, that is another $200k per year they are basing against they supposed income. Add in the amount they can depreciate per year, operational expenses, etc, etc, and it isn't that hard to show losses.