Quote:
Originally Posted by Azure
What I don't understand is why someone can depreciate an asset on paper that actually increases in value over time.
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Because rich people are responsible for making the rules?
At least in Canada, the depreciation should eventually get covered by capital gains taxes at sale or at the owner's death. But in the US, if you keep the asset until you die, the capital gains disappear and get passed to your heirs at the market value on the date of death (called a "step up basis") with no capital gains attributed to it. And if you want to avoid the estate tax (which exists largely to counter the fact that there's no deemed disposition on death), there are numerous methods to skirt that
Also, by some strange coincidence (can't imagine why), with the 2017 tax overhaul in the US, like-kind exchanges (where you can sell an investment tax free if you use the proceeds to buy another similar asset) were maintained for only one investment sector: commercial real estate. So essentially owners of commercial real estate can keep buying and selling properties tax free, depreciate the hell out of it to reduce their income tax from other revenues to nothing, hold it until they die, and then pass it to their heirs with no capital gains tax owing (and likely little to no inheritance tax if they've structured it correctly).