Originally Posted by
UGBSM
Ok, I didn't mean to cast despersions on the bonus depreciation strategy as illegitimate. If you can qualify for "material participation" and your "cost segregation survey" even makes it worthwhile then then this years' 60% bonus depreciation may be useful to you. In my case it was not. And in any case you must recapture that depreciation later anyway, of course.
Just don't try to fudge your way into something that you will probably have to justify at, IMO, an almost inevitable audit.
1) Depreciation recapture tax is a lower rate than income tax. Taking depreciation is tax arbitrage and an interest free loan while waiting to pay the tax.
2) IRS assumes you took depreciation even if you didn't. You will pay depreciation recapture regardless. The only option is bonus or accelerated depreciation.
3) Having taken millions in depreciation over 20 years of RE ownership, I've never been audited. My time is due, but with accurate depreciation schedules my CPA says it's about as exciting as a V1 cut in the sim.