(g) Alternative depreciation system for certain property
(1) In general
In the case of?
(A) any tangible property which during the taxable year is used predominantly outside the United States,
(B) any tax-exempt use property,
(C) any tax-exempt bond financed property,
(D) any imported property covered by an Executive order under paragraph (6), and
(E) any property to which an election under paragraph (7) applies,
the depreciation deduction provided by section 167 (a) shall be determined under the alternative depreciation system.
(2) Alternative depreciation system
For purposes of paragraph (1), the alternative depreciation system is depreciation determined by using?
(A) the straight line method (without regard to salvage value),
(B) the applicable convention determined under subsection (d), and
(C) a recovery period determined under the following table:
In the case of: The recovery period shall be:
(i) Property not described in clause (ii) or (iii) The class life.
(ii) Personal property with no class life 12 years.
(iii) Nonresidential real and residential rental property 40 years.
(iv) Any railroad grading or tunnel bore or water utility property 50 years.
The question is about UBIT in an IRA. Everyone warns about it, but is it an issue?
IRS pub 598 allows you to deduct depreciation (pg 18) against the UBIT. When I checked the numbers, it seems the depreciation is always larger than the tax due.
For instance:
Financed debt $160,000 of $200,000 = 80% ratio or debt/basis percentage
Gross rents of $12,000/yr
Corp tax rate 15% (
(g) Alternative depreciation system for certain property
(1) In general
In the case of?
(A) any tangible property which during the taxable year is used predominantly outside the United States,
(B) any tax-exempt use property,
(C) any tax-exempt bond financed property,
(D) any imported property covered by an Executive order under paragraph (6), and
(E) any property to which an election under paragraph (7) applies,
the depreciation deduction provided by section 167 (a) shall be determined under the alternative depreciation system.
(2) Alternative depreciation system
For purposes of paragraph (1), the alternative depreciation system is depreciation determined by using?
(A) the straight line method (without regard to salvage value),
(B) the applicable convention determined under subsection (d), and
(C) a recovery period determined under the following table:
In the case of: The recovery period shall be:
(i) Property not described in clause (ii) or (iii) The class life.
(ii) Personal property with no class life 12 years.
(iii) Nonresidential real and residential rental property 40 years.
(iv) Any railroad grading or tunnel bore or water utility property 50 years.
Thanks for great input here - Posted by John Merchant
Posted by John Merchant on November 01, 2005 at 13:13:50:
John
Just wanted to thank you for your great input here and your bedrock-solid tax and accounting thinking.
Us wild creative types are always in need of somebody solid back there to keep us on straight and legal tax-tracks, and somebody like you who can work the numbers and knows what they mean.
As one who almost has to take his (my)shoes off to add and subtract, it’s sure neat to have you watching over us poor un-mathematicians.
I searched for the source document of IRC Section 168(g). After I realized it was CFR 26 things became easier. It appears that CFR 26 part 1 Section 168(g) is missing. Do you know what is covering it now? The only docs I could find about IRC Section 168(g) concerned property outside the US.