Depreciation Schedule Expiring

[Douglas Stewart]

My father in law owns a 176 unit building in Los Angeles.  It was built in 1991 meaning the depreciation schedule is beginning to expire.  He is worried about losing the tax benefits.  How big of a concern is this?  Would updating the units be a good way of replacing it?  Any other suggestions are welcome.  Thank you!

[Yonah Weiss]

@Douglas Stewart One option to create extra depreciation would be to do major renovations, as you mentioned above. All of the new assets that are replaced in the property, begin depreciation from new. For example, if he spends $1,000,000 on renovations that dollar amount can now be depreciated. Those assets hat fall into the 5-year and 15-year depreciation life, can have depreciation accelerated, and take those deductions early on. So he'll still have to spend money in order to get 'new' depreciation' not necessarily worth it.

1031 won't help a lot @Matt Popilek, because the basis of the old property which has been fully depreciated is not carried over to the new property. He will be able to depreciate any additional amount that is put into the new property.