- Aug 24, 2007
Cool, call it a loan. But, it's not JUST a loan. It's an interest free loan that actually pays you take it.What you call recaptured depreciation, I call a loan. If it will be paid back, it's a damn loan - minus the details you cited, which I won't go into again for the sake of brevity.
If I offered you a loan right now and told you that not only would you not have to pay interest on it, but that you would have to pay back less than what you borrowed, would you take the loan?
The IRS is offering you FREE MONEY, and you're complaining that it's not enough money to be worth it. How ridiculous is that???
Okay, I think I can make this more clear... Here's an analogy for you...
Let's say that BEFORE a big storm, your insurance company handed you $10,000 to replace the roof should it get damaged in the storm. The storm comes, the roof gets damaged, and you have your $10,000 to repair it. Great! But, what if the storm comes and doesn't damage the roof? Do you think you should be entitled to keep that $10,000? Would you complain that the insurance company gave you a $10,000 loan and is now expecting you repay it despite the fact that you didn't need it to compensate you for any loss?
This is how depreciation works. You're being compensated -- in advance -- for a loss. If you don't actually have that loss, they want their money back. That's not unreasonable.
As to your point about renting being a deduction that doesn't have to be paid back compared to depreciation which MIGHT have to be paid back is a completely separate issue. When you rent, you get no long term benefit from the property. You're literally trading money for space, end of story. This is an expense to the company that the company can never recoup, so the IRS gives you a deduction against income.
So, using the analogy above, the renting situation is the same as being 100% certain that the storm will destroy your roof. The insurance company says, "There's no way you're not going to take a loss from this storm, so we'll agree upfront that you don't have to give us the $10,000 back."
That's what the IRS is doing. They know that by renting, there is 100% guarantee of no upside. So, they tell you upfront that you'll never have to repay the deduction.
Does that clarify?