Deloitte: Change Depreciation for Real Estate.(Deloitte & Touche)(Brief Article)

Financial Executive, January, 2001 by Marshall, Jeffrey

Current property depreciation methodologies are outmoded and need to be revised, argues Deloitte & Touche. In a recent study, the Big Five firm argues that the 39-year nonresidential and 27.5-year residential property depreciation schedule in current tax law simply doesn't provide property owners with a quick enough investment recovery.

The Deloitte study suggests that tax depreciation should be updated to reflect the actual rates at which building investments lose value as they age. Using regression analysis, the firm's consultants estimated from market data the annual rate of loss of value (called economic depreciation) of the original investment in a building. The authors conclude that, if the straight-line method of depreciating an entire structure were...

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