Fall/Winter 1980, Vol 5, No 2

Abstract: Tax shelter is much emphasized in the analysis of real property, and much of the current literature presumes the importance of variables such as the depreciation method, the depreciable lives chosen, and the tax rate on income. This paper explores the nature of tax shelter and the theory of tax capitalization in order to measure the actual impact of these variables on equity values and rates of return. Using a well-known after-tax equity valuation model, a sensitivity analysis is performed and yields surprising results which suggest a re-evaluation of investment decision-making and a new look at the role of taxation in this process.