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Subject:  rental property depreciation recapture Date:  3/14/2008  4:28 PM
Author:  zhaohanwilson Number:  99448 of 132797

This is my 1st posting… I have acquired a few rental properties in the past 3 years. Due to the depreciation deduction on the tax return, I have always been able to take the max $25,000 passive activity loss with sever years’ worth of carry over. I wondered if I could skip claiming the depreciation expense on my rental properties so that I would not have to recapture it at the time when I sell the rental property. After some research, I found 2 answers: 1: at the time of the sale of the rental properties, I have to reduce my purchase price with all the rental depreciation REGARDLESS if I actually claimed them or not on my tax return over the years I am renting them out; 2: I only need to recapture the depreciation I ACTUALLY TOOK. Can any authority here give me an affirmative answer? It seems to me unfair that I have to recapture all the depreciation regardless if I took them or not. However, if that’s true, how do I plan ahead to minimize this recapture tax? By the way, I do not have other “passive activities”, which means that all those rental activities carry-over loss is wasted each year. Is there a way to use this loss offset the gain at the time when I sell my rental properties?
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