Recapture Premium job, reading, someone, please

AndyNZ

Can someone please explain to mean what "recapture premium" in reading 46 of Alt Investments is? The book succeeds in doing a pretty good job of not explaining it well. Thanks

scarecrow

It assumes that any future investments in the property that should be depreciated do NOT materialize and vola you recapture them..hope that makes some sense

iteracom

here's the explanation:

1. you buy a property
2. the property is assigned an "accounting depreciation" which is just an estimate. the final reduction in value once you sell the property will be different most likely
3. once you sell the property, if the book value of the property (cost - accumulated dep.) is less than the net sales price (sale price - selling cost), then this means your estimate of depreciation was too high. YOU MUST PAY THE TAX MAN BACK BECAUSE YOU CHEATED HIM IN PREVIOUS YEARS
4. the recaptured depreciation is the minimum of (book value - net sale price) or (accumulated depreciation)
5. the additional taxes you owe are (recaptured dep X tax rate)

cv4cfa

Thanks a ton gangstarr. I'm a big fan of "militia", "mass appeal", and "skillz"

MiniMe7

Just do it like this:

ATER = Net Sales - Cap Gains Tax - Mortgage Balance - Accumulated Depreciation x Recapture tax rate

Sum up your depreciation, multiply by the tax rate they give you specifically for that, and subtract from your normal ATER, and you're set.