Rental property tax question

[bizaro86]

Originally Posted by squiggs96

The benefit is when you sell, or have a deemed disposition, of the rental property. At this point you, as the seller, and the purchaser need to agree on the split between land and building. As the seller you should want more of this going towards your land, and this will reduce the amount of recapture. In an over the top example, let's say you buy your condo for $100,000. You allocate 80% to building and 20% to land. After a number of years the UCC of your building has gone from $80,000 to $60,000. Now let's suppose you sell this condo for $120,000. If you can allocate 50% of the value to the land, and 50% to the building, your proceeds from disposition are equal to the UCC of your building, and then there is no recapture.

Some people want to be able to take more CCA, so they want to allocate more of the value to the building. It's all preferences and priorities.

Oh, ok. I thought maybe you meant there was an advantage prior to sale. My condos are most likely going to be sold to personal residents who wouldn't be taking CCA, so its quite possible I could have a 50/50 split put in the contract without objections, which is my tentative plan.

[Locke]

I hate to not give out advice on this, trust me, but more or less Squiggs has nailed the gist of it.

The thing with rental properties is that the Devil really lies in the details as well as long-term tax planning strategies so I cant really give a broad brush-stroke answer on this one.