Can anyone help explain why in the equity reversion calculation, we subtract the (recaptured) depreciation twice?
Just reading this part of book. My take: Subtract once to reduce realized gain since calculation of realized gain using depreciated purchase price. Then subtract the tax on recaptured depreciation. Tax is reduced during cash flow caculation due to depreciation. i.e. less tax was paid before, need to pay more tax when selling for profit since there is really no depreciation.
If you look p579 carefully. it never subtract the (recaptured) depreciation twice. ignoring the first tow substraction Net sale price 723,469 - Purchase price525,000 ================= gain 198,469 now here come the recaptured dep (only once) 65,596 * 25% = 16399 NOTE: “Why. IRS wants to first take back, or “recapture,” some of the benefits of the depreciation deductions you’ve been claiming for all the years you owned the property.”
I found this confusing also…