INTRODUCTION TO REAL ESTATE TAX SHELTER (Supplement Pages 6-8)精品分析.ppt

Donald J. Weidner * Estate of Franklin (cont’d) Ninth Circuit said there can be genuine indebtedness even though: The Buyer has the power to walk away at end of 10 years and lose only $75,000 “interest payment” The deed to the Buyer was never recorded Sale payments/leaseback rent payments cancel each other out “Sellers” remain liable on the Mortgages “Sellers” can increase the Mortgages “Sellers” can make capital improvements [and demand lower rent] “Buyer’s” obligation is nonrecourse only Donald J. Weidner * Imprudent Abandonment Test Taxpayer’s failure “to demonstrate that the purchase price was at least approximately equal to the fair market value of the property” is “fatal.” “An acquisition . . . at a price approximately equal to the fair market value of the property under ordinary circumstances would rather quickly yield an equity in the property which the purchaser could not prudently abandon. This is the stuff of substance.” This case is famous for the “imprudent abandonment test” Donald J. Weidner * Depreciation As to Depreciation: “It is fundamental that ‘depreciation is not predicated upon ownership of property but rather upon an investment in property.’ No such investment exists when payments of the purchase price in accordance with the design of the parties yield no equity to the purchaser.” The “purchase price payments” during the years in question “have not been shown to constitute an investment in the property.” Donald J. Weidner * Interest As to Interest: Nonrecourse debt does not support an interest deduction if the “debt has economic significance only if the property substantially appreciates in value prior to the date at which a very large portion of the purchase price is to be discharged.” Donald J. Weidner * Interest (cont’d) “For debt to exist, the purchaser, in the absence of personal liability, must confront a situation in which it is presently reasonable from an economic point of view for him to make a capital investment in