REAL ESTATE TAX SHELTER — A POSTSCRIPT

EARLIER THIS YEAR, THE WAYS AND MEANS COMMITTEE CONDUCTED HEARINGS ON TAX-REFORM. THE AUTHOR ADDS A POSTSCRIPT TO THE PAPER PRESENTED AT THE PANEL DISCUSSION ON REAL-ESTATE TAX-SHELTERS TO EXPLORE SOME ASPECTS OF THE PROBLEM NOT ADEQUATELY EXAMINED AT THE HEARINGS. HE ALSO RE-EXAMINES SOME FUNDAMENTALS IN THE LIGHT OF WHAT OTHERS HAVE SAID TODAY. THE DISCUSSION INCLUDES - 1) WHAT IS PROPER DEPRECIATION FOR IMPROVED REAL-ESTATE, INFLATIONARY GAINS. SINCE IN THE TYPICAL CASE THE RATE OF DEPRECIATION EXCEEDS THE RATE OF DEBT REPAYMENT IN THE EARLIER YEARS, THE EFFECTS OF INFLATION MAY BE NON-EXISTENT. WHATEVER MERIT THERE MAY BE TO THE INFLATION ADJUSTMENT ARGUMENT, IT WOULD SEEM TO HAVE LITTLE APPLICATION TO THE TYPICAL REAL-ESTATE INVESTMENT. 3) SOME FUNDAMENTS INCENTIVES OFFERED THROUGH THE TAX SYSTEM CLEARLY REPRESENT THE EXPENDITURE OF GOVERNMENT RESOURCES IN THE SAME WAY AS DIRECT GRANTS OR LOANS.