13. Syndicate's Paper Loss — Additional Real Income to You

Sometimes you see that in the first year or even in the first few years the syndicate, while making its regular yearly distributions, sustains a loss on paper. As a result you won't have to pay any income taxes on your distribution. In fact for tax purposes you are deemed to have sus­tained a loss which you may use to offset other income. By now you know how this comes about. The deprecia­tion reserve during the first few years is greater than the total of the payments to the investors and the sum ap­plied to the reduction of the mortgage. This means addi­tional income to you to the extent that you save income taxes because of the paper loss. Naturally it won't last. Under the declining balance method the depreciation allowance will decrease and the tax bite will increase, as times goes by.

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