Would you like
to print a copy of this book to read offline? Click Here to download the printable PDF version |
 |
01. This Book
02. Syndicate Boom
03. Get Information
04. Syndicator
05. How much?
06. Depreciation
07. Depreciation Applied
08. Declining Balance
09. Straight Line
10. Paying Taxes
11. Pay Mortgage
12. Income Taxes
13. Paper Loss
14. Tax Shelter
15. Rent?
16. Syndicator Units
17. Wear + Tear
18. Lease-Hold
19. Building
20. Comparison
21. Specialized Properties
22. Growth
23. Leverage
24. Share Growth
25. Why + How
26. Syndicate Agreement
27. Net Lease
28. Long-term Lease
29. No Guarantee
30. Inflation Clauses
31. "Inflation Clause" Works
32. Inflation Clause?
33. Mortgage Due
34. Interest Rates
35. Short Term Mortgage
36. Good Mortgages
37. Refinancing
38. Refinancing Clauses
39. Share of Mortgage
40. Share of Profit
41. Purchase Options
42. How Purchase Options
43. Stunt the Growth
44. "Subordination"
45. Long Term Lease
46. Business Organizations
47. Syndicate Debts?
48. Management
49. Your Consent?
50. Sell Your Unit
51. Investment Trust?
52. Business Syndicate
53. Multiple Properties
54. Dream or Reality?
55. Syndicator's Background
56. Value of Guarantees
57. Look for Yourself
58. Conclusion
Resources
7. Depreciation Applied to Real Estate
The traveling salesman uses the car in his business. The manufacturer uses machines. In a syndicate—your equipment—your means of making money is the building which is owned by the syndicate. The building, like any other piece of equipment, is subject to wear and tear and to obsolescence. The tenants, users, and the elements all cause the wear and tear. But do not underestimate obsolescence. Walk-up apartment houses will not find tenants when there are enough apartment houses with elevators. Air conditioned apartments will draw tenants from older houses. Office buildings have similar problems. Just walk along Park Avenue in New York City or Main Street of your home town and look at all the new buildings. The owners did not tear down the old structures because they were in the mood to build. They had to put up more modern buildings to meet competition.
The useful life of a building and the deduction permitted for depreciation depends on the type, age and the condition of the structure. But a part of the distribution of the syndicate will represent depreciation reserve, or funds which the syndicate may set aside for depreciation, and you will not have to pay income taxes on that part. Be sure to check the brochure to find out what portion of the distribution is subject to income tax and what portion exempt.
New York State law requires that your brochure state how much of the contemplated distributions are income and how much return of capital. Many other states have similar legislation or are in the process of enacting similar laws.
At some time in the future the depreciation allowance will come to an end. All distributions which you receive thereafter are fully subject to income taxes. The reasons are simple. If the syndicate bought a building for $500,000 and over the years it received $500,000 for depreciation, there is no need to worry anymore about wear and tear and obsolescence. The syndicate got its money back.
Are You Ready To Move Onto The Next Lesson? Click Here...